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Hummer Deal Teetering; Brand's Future in Doubt

Posted: Feb. 24, 2010

General Motors’ plan to sell its struggling Hummer SUV brand to a Chinese company appears to be in trouble this morning. The Chinese government, it seems, may not approve the deal. Sichuan Tengzhong Heavy Machinery may, however, have a way around regulatory approval.

Reuters reports, “Chances of securing regulatory approval for the deal by Sichuan Tengzhong Heavy Industrial Machinery Co have dimmed in recent weeks.” Tengzhong may be “weighing the option of using an offshore investment vehicle” to buy the brand “if it cannot get regulatory approval.”

It isn’t clear whether Chinese authorities would attempt to stop the purchase if Tengzhong were to try to use an offshore company to skirt regulators. Autoblog reports, “The Chinese National Development and Reform Commission and the Ministry of Commerce are thought to have taken issue with the idea of such an environmentally unfriendly automaker coming under Chinese ownership.” Chinese authorities have reportedly also raised concerns about the fact that Tengzhong, which primarily manufactures heavy construction equipment, “has never actually made a passenger vehicle.”

The Chinese auto industry is already a confusing maze of small, regional companies, even without the construction equipment manufacturer attempting to get into the game. Autoblog notes, “China already has over 100 companies producing automobiles and the government has gone on record saying it would like to reduce that number.”

If the sale should fall through, analysts widely expect GM to simply fold the Hummer brand, as it did with its Saturn brand when a purchaser backed out of a similar agreement.

LINK: Hummer Deal Teetering; Brand's Future in Doubt - U.S. News Rankings and Reviews
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