DETROIT – Who is going to buy Hummer? General Motors took the unusual action of announcing a memorandum of understanding on its sale Tuesday morning, without naming the buyer. GM’s chief financial officer, Ray Young, said in a conference call that Hummer’s potential new owners “prefer not to disclose” their identity at this time.
But the drama behind the identity of Hummer’s prospective new owner didn’t last long. Earlier in the day, the New York Times reported that GM has reached a preliminary agreement with the Chinese company Sichuan Tengzhong Heavy Industrial Machinery Company Ltd. GM confirmed the report later this afternoon.
Sichuan Tengzhong is a privately owned maker of road equipment, but has recently been moving down into the heavy-duty truck market, according to the Times. If completed, the deal would mark the first time a brand selling cars in America would be bought by a Chinese company. Several Chinese companies have been rumored to be in the running to buy Swedish automakers Saab and Volvo in recent months. Estimates have Hummer selling for less than $500 million.
“The Hummer brand is synonymous with adventure, freedom and exhilaration, and we plan to continue that heritage by investing in the business, allowing Hummer to innovate and grow in exciting new ways under the leadership and continuity of its current management team,” said Yang Yi, CEO of Tengzhong. “We will be investing in the Hummer brand and its research and development capabilities, which will allow Hummer to better meet demand for new products such as more fuel-efficient vehicles in the U.S.”
According to GM, Hummer will continue to maintain its U.S. headquarters and operations, and the brand will continue to be managed by the existing leadership team. Hummer’s dealer network is also expected to be expanded worldwide by Sichuan, with the Chinese market of course one of the main targets. If all goes well, the deal will be completed by the third quarter of this year.
It may end up being a hard sell here, however, as Hummer has been associated with the American military. The potential sensitive nature of Chinese ownership may be why Sichuan Tengzhong did not want to be named at the outset.
Early on, last year when GM said it would sell or close the brand, Russian investors were the lead candidates, later, Chinese automaker Hunan Chengfeng Motor Company entered the rumor mill as a potential suitor. Middle Eastern oil was also a possiblity; Aabar Investments recently acquired 9.1-percent of Daimler AG, and Mubadala Development Company owns 5-percent of Ferrari. Both investment firms are based in Abu Dhabi.
GM says it will continue to build H3s for the new owner on an interim basis, until the purchaser can get its own production up and running. The deal “will secure more than 3000 jobs in manufacturing, engineering and dealerships across the country,” GM says in its press release.
It has closed its South African plant that built the H3 for right-hand-drive markets, but the Shreveport, Louisiana factory that builds left-hand-drive H3s also is gearing up for new compact pickups expected for the 2012 model year.
And GM has designs for the next-generation H2 and H3, plus plans for the Jeep Wrangler-like H4 that should sweeten the deal for the new owner. One big question mark is whether AM General would resume production of a civilian H2 under contract for a new owner.
Young said GM has some 16 entities interested in buying Saturn division. He described them mostly as “interested parties,” i.e. dealership groups, and private equity groups. Young noted that the process is taking longer than expected, that one issue still not resolved is whether GM would continue to build Saturns on contract or whether a new owner will find another source of vehicles. Roger Penske’s interest is rumored to involve a deal with Nissan/Renault in which excess Nissan capacity in the U.S. would go to future Saturn models.
Young also tried to offer some reassurance that Opel will continue to be an integral part of General Motors. Asked who is going to be running Opel, he said that the new GM European team will report to Adam Opel AG. He said that American models developed, in part, overseas are still on track for introduction. But we already knew that – the 2010 Buick LaCrosse is scheduled to go on-sale this summer and the 2011 Chevrolet Cruze, already on sale in much of the world, enters the North American market more than a year from now.
But the LaCrosse’s Epsilon platform was developed chiefly in Warren, Michigan, with Opel-specific tuning done in Germany, and the Cruze is largely a product of GM’s Daewoo operations in South Korea.
My concern is whether GM will continue to have substantial operations in Western Europe (where Chrysler has been lagging for decades). Young admitted that lots of details needed to be worked out with Magna International and Sberbank. The good news here is that GM isn’t dealing with Fiat’s Sergio Marchionne, the guy who extracted $2.5 billion from GM so it wouldn’t have to buy Marchionne’s company.
Finally, Young also outlined a plan for “wind-down” agreements with about 1100 dealers it plans to close, on its way to a total dealer reduction of roughly 2700 dealers in the next few years. GM expects some dealers will drop out due to attrition, and others will have agreements with whoever owns Hummer, Saturn and Saab.
GM will contribute support payments to dealers that have been told they will lose their franchise agreements. Young didn’t disclose how much each dealer would get. Nor did he say how GM would handle the dealers’ inventory. Turning over unsold cars and trucks from a closed dealer to one that stays open means the ’09 leftovers will linger that much longer into 2010. It’s better than the alternative, however; accelerating sales incentives to clear cars and trucks from lots before they close. That would have a devastating effect on the value of new, and late-model GM vehicles.
Source : blogs.motortrend.com/6549275/car-news/mystery-over-chinese-company-in-talks-to-buy-hummer/index.html