Hummer's buyer expects to complete GM deal in 3rd quarter

ERJ staff report (AN)

Beijing, China (Reuters) -- Sichuan Tengzhong Heavy Industrial Machinery, the surprise winning bidder for bankrupt General Motors' Hummer brand, said the deal should be wrapped up before October.

Yang Yi, the firm's general manager, also said in an interview that Tengzhong has no plans to transfer Hummer equipment and technology to China from the United States, or to take on any debt accrued by the business.

Yang, whose company is unknown to most Chinese even in its own backyard in southwestern Sichuan Province, has little experience dealing with media and was almost apologetic about not providing more details about the deal.

"I hope you can understand, but there are many things I cannot talk about," he said. "We think a deal should be completed by the third quarter."

One confidential aspect was the Hummer price tag, which analysts said would be much less than the $500 million GM was asking for last year. Investment bankers have said Hummer would now bring about $100 million in cash.

The executive did say that Tengzhong, a manufacturer of special-use vehicles as well as bridge and highway components, planned to retain the Hummer management team to ensure quality in the off-road vehicle and to keep its small but enthusiastic fan base happy.

On June 2, Hummer CEO Jim Taylor said he would be kept on by the new owners and the U.S. dealer network would stay intact.

'Only one Hummer'

"There will not be a China Hummer and a US Hummer, Yang said. "There is only one Hummer."

The Chinese company was also looking to develop the vehicle into a global brand -- 70 percent of sales are now concentrated in North America -- that was more fuel-efficient and environmentally friendly, Yang said.

"We want to make a green Hummer," he said. "We think the Hummer has huge potential in emerging markets."

"Tengzhong and Hummer are very aware of the government's fuel-efficiency requirements," he said. "Hummer has already achieved substantial progress in this area."

US demand -- which comprises the bulk of total Hummer sales -- has dropped 30 percent this year May after declining 51 percent to 27,485 amid record gasoline prices last year.

No debt

While Yang was reluctant to talk about the financial details of the ongoing negotiations, he did say any deal would not include taking on the GM unit's debt.

"We would not be responsible for any debt obligations."

The provincial government of Sichuan, a farming and industrial powerhouse in China's underdeveloped western region, has identified the automobile sector as one of four strategic industrial growth engines.

And while the provincial seat favors the deal, it must still be approved by the central government, which is pushing for more fuel efficiency from individual citizens and industry.

Tengzhong's lack of experience in both overseas markets and in the automobile industry has prompted a flood of skepticism and even ridicule from Chinese auto executives, industry analysts and the media.

Chinese automakers need technology and designs, helping fuel a steady stream of market talk about mainland companies lining up to buy distressed auto assets.

Press reports reported last week that Beijing Automotive Industry Holding Corp. is interested in buying Ford Motor Co.'s Volvo car unit after failing to win a bid for GM's Opel.

From Automotive News (A Crain publication)