GM signs Hummer sale deal with Sichuan Tengzhong

ERJ staff report (AN)

Chrissie Thompson, Automotive News

Detroit, Michigan -- General Motors Co., working to cut its U.S. brand count in half as it recovers from bankruptcy, has completed an agreement to sell the Hummer SUV brand to China's Sichuan Tengzhong Heavy Industrial Machinery Co. Ltd.

The companies did not disclose financial terms in announcing the deal. News reports Thursday said Tengzhong would pay $150 million.

The accord moves GM a step forward in its effort to remake itself by selling brands it had taken on over the past two decades. Last week, a deal to sell Saturn to Penske Automotive Group collapsed a day before it was expected to close.

Tengzhong will purchase Hummer through an investment entity, in which it will hold an 80 percent stake. Entrepreneur Suolang Duoji, whose holdings include Chinese chemical maker Lumena, will control the other 20 percent.

Hummer spokesman Nick Richards said it was too early to say when the sale will close. The next step is getting approval from U.S. and Chinese regulators.

“It's ready when it's ready,” Richards said. He called media reports that the Chinese government might reject the deal “speculation.”

Brand, trademarks

Tengzhong is scheduled to buy the brand, its trademarks and licensing rights to make vehicles and will assume U.S. franchise agreements. GM had 158 Hummer franchises at the start of the year. Tengzhong will also get manufacturing, business services and some components from GM during a transitional period, which was not defined.

As an example, the companies said GM's assembly plant in Shreveport, La., will make the H3 and H3T, and military-vehicle maker AM General LLC's factory in Mishawaka, Ind., will produce the H2 until June 2011. The deal includes an optional, one-year extension for the factories to make the vehicles until the following June.

Hummer CEO James Taylor, formerly head of Cadillac, will remain in his current position with the new company.

GM had said in June that it expected to sell Hummer to the Chinese heavy machinery maker, which has no experience in the auto industry. Hummer's 64 percent sales decline through September from year-earlier levels was the steepest of any volume brand in the United States.

GM bought the Hummer brand in December 1999 from AM General, which has also continued to make versions for the armed forces.

Sales history

Hummer entered the civilian market in 1992. Non-government Hummer sales were averaging between 800 and 1,000 units annually when GM bought the brand.

Hummer's U.S. sales peaked at 71,524 in 2006, before demand was choked by gasoline prices that soared above $4 per gallon last year. Sales through September of this year dwindled to 8,193.

GM had estimated in the summer of 2008 that the sale of Hummer “might realize $500 million or more,” CEO Fritz Henderson said in documents filed during the automaker's 39-day bankruptcy.

GM's agreement to sell Saturn to Penske, the nation's second-largest auto retailer, fell through after Penske's arrangements to get vehicles from Renault SA was rejected by Renault's board. GM is now winding down Saturn and its dealer network.

In addition, GM has an agreement to sell its Swedish Saab brand to supercar maker Koenigsegg AB. Koenigsegg has said it expects to finish the deal by the end of this month.

GM is dropping Pontiac and keeping Chevrolet, Buick, GMC and Cadillac.

Reuters contributed to this report

From Automotive News (A Crain publication)