Time Running Out For The HUMMER-Tengzhong Deal

Posted in Uncategorized by wolferadio11 on February 23, 2010

By Edward Niedermeyer on February 23, 2010 repost

Although the Chinese government takes much of February off for New Year festivities, GM’s deal to sell HUMMER to Sichuan Tengzhong has exactly one week left before a self-imposed deadline for completion arrives. The deal is being held up by China’s Commerce Ministry which has publicly said that it wants the Chinese auto industry to consolidate and become “greener,” two goals that are severely at odds with Sichuan Tengzhong’s HUMMER aspirations. Now, the Financial Times reports that Tengzhong may be trying to pull an end-around on the Chinese government by pursuing a purchase via an offshore investment vehicle. This would (in theory) evade the requirement for the Commerce Ministry’s approval. In reality …

Ayiahhhhh! Whether they buy Hummer in Hong Kong, the Caymans, or the Isle of Man: To produce in China, you need the big red chop from the government, and you will have used up your last bit of guanxi in China at that point. Come to think of it, they might tell the foreign entity: “Laowei (foreigner), find yourself a Chinese joint venture partner.-”

HUMMER’s production has been shut down until the deal concludes, and HUMMER sources tell us that dealers are “hanging on by their fingernails,” surprisingly calling for the company to resume production of the H2. Our source is optimistic about both the deal and HUMMER’s long-term chances, comparing halting progress on the deal to the Ford-Geely-Volvo deal, a comparison that Reuters rejects. Because the plan is to continue HUMMER’s 70-30 US-abroad sales mix, an offshore deal could keep the lights on at HUMMER… but it will have to happen quickly before dealers lose hope. And before declining sales reach the point of no return.

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