GM says Hummer deal with Tengzhong 'on track'

10:58, October 10, 2009      

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General Motors Co said talks to sell the Hummer line of sport-utility vehicles to Sichuan Tengzhong Heavy Industrial Machinery Co remain "on track" after the companies didn't conclude the deal in the third quarter.

"The parties have been in frequent discussions working closely to finalize a definitive agreement," Hummer CEO Jim

Taylor said in an e-mailed statement yesterday. "Talks are on track. It would be inappropriate to comment further until an agreement is reached."

GM and Tengzhong had planned to close the deal in the third quarter, the companies said when they announced the pact on June2. Executives from Chengdu, China-based Tengzhong arrived in Detroit on September 30 to complete negotiations, said a person familiar with the talks, who asked not to be identified because the discussions are private. GM hopes to complete the sale by the end of the year, Treasurer Walter Borst said October 1.

A citizen passes by a Hummer in Beijing's Yayuncun auto market. Wang Jing

"GM is anxious to get this done," said Michael Robinet, an analyst at CSM Worldwide in Northville, Michigan.

GM emerged from bankruptcy July 10 with plans to cut back to four vehicle brands in the USA, but a deal to sell the Saturn brand to Penske Automotive Group Inc fell through September 30. Its proposed sale of the Saab Automobile brand is progressing, and the Detroit automaker is winding down Pontiac.

Penske, operator of 310 auto retailers, broke off talks to acquire Saturn last week when Renault SA chose not to make future vehicles for the brand. GM said it would now wind down the unit next year.

Chinese takeover

Christina Stenson, a New York-based spokeswoman representing Tengzhong, declined to comment on Hummer sale negotiations.

The sale of Hummer to Tengzhong would mark the first major Chinese acquisition of a US auto brand. Tengzhong said in June that it was in talks to buy Hummer as part of GM's plans to shed four brands.

The companies have said Hummer will remain based in southeastern Michigan and that the deal would protect more than 3,000 US corporate, manufacturing and dealership jobs.

Tengzhong will assume Hummer's dealer accords and a senior management team, and plans to hire Detroit-based GM to assemble SUVs. The purchase is the first entry into the passenger-vehicle business for Tengzhong, a closely held maker of special-use vehicles, structural parts for highways and bridges and construction machinery.

Credit Suisse Group AG is the financial adviser and Shearman & Sterling LLP is international legal counsel to Tengzhong, while Citigroup Inc is advising GM, the companies said. The sale is subject to approval by US and China regulators.

Declining demand

GM is keeping its Chevrolet, Cadillac, Buick and GMC brands for the US market.

Koenigsegg Automotive AB, the Swedish maker of exotic sports cars, has agreed to buy GM's Saab brand.

That sale depends in part on the unit receiving a $600 million European
Hummer deal, finally

Investment Bank loan backed by the Swedish government. The sale also needs private financing, including 3 billion kronor ($431 million) that became available when Beijing Automotive Industry Holding Co. joined Swedish exotic sports-car maker Koenigsegg's bidding partnership.

The automaker bought the license for the Hummer brand from AM General in 1999 and started selling the $140,000 H1, a 7,600-pound (3,400-kilogram) SUV patterned after the all-terrain military vehicle popularized for road use by actor Arnold Schwarzenegger, who is now California's governor.

The model won enough of a following for GM to add the 6,600-pound H2 in 2002 and the 4,700-pound H3 followed in 2005.

Rising gasoline prices eventually eroded demand. GM halted production of the H1 in 2006, when Hummer's US deliveries peaked at 71,524, according to Autodata Corp. US sales of the SUVs, which start at about $31,000 for the H3, fell 51 percent in 2008 and 62 percent this year through August.

Source:China Daily
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