GM sells Hummer to mystery buyer

[Yeo]

General Motors Corp. said Tuesday that it has signed a deal to sell its Hummer truck unit, just one day after filing for bankruptcy.

But GM (GM, Fortune 500) would not identify the buyer nor name a price, saying only that the deal would close by the end of September.

GM had revealed in April that it was courting three serious offers for the Hummer brand. The automaker would not confirm Reuters' report that offers ranged from $100 million to $200 million.

"I'm confident that Hummer will thrive globally under its new ownership," said Troy Clarke, president of GM North America, in a press release. "And for GM, this sale continues to accelerate the reinvention of GM into a leaner, more focused, and more cost-competitive automaker."

As part of the deal, some GM plants will continue to build the Hummer brand for the new owner, at least for a while. The company said its Shreveport, La. plant will keep building Hummers for the new owner until at least 2010.

GM also said that the deal should protect more than 3,000 jobs in manufacturing and engineering, and at dealerships "around the country."

The Hummer and other large vehicles have been a drag on the U.S. auto industry since fuel prices spiked in 2008 and the recession deepened.

GM said it sold 5,013 Hummers worldwide in the first quarter, down 62% from the 13,050 that it sold in the same period the prior year.

Hummer isn't the only brand that GM is leaving behind. The automaker will also shed its Pontiac, Saturn and Saab brands and cut loose more than 2,000 of its 6,000 U.S. dealerships by next year.

That could result in more than 100,000 additional job losses if those dealerships are forced to close.

GM filed for bankruptcy Monday, just hours after Chrysler's bankruptcy process cleared a hurdle when a federal judge approved its asset sale.

The GM bankruptcy was hailed by President Obama, who wants a complete overhaul of the U.S. auto industry, even though the Chapter 11 filing is expected to result in the loss of 20,000 jobs and the closure of a dozen facilities.

Citigroup (C, Fortune 500) was financial adviser in GM's Hummer deal.

http://money.cnn.com/2009/06/02/news/companies/gm_hummer/index.htm?postversion=2009060207
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[Red Dawg]

HONG KONG--Why is a Chinese company with no apparent car experience looking to buy General Motors' Hummer brand? That is what some Chinese analysts are asking. If past cases are any indication, China's Tengzhong faces significant challenges in successfully absorbing a Western brand like Hummer.

General Motors, which filed for bankruptcy Monday, said Tuesday that it signed a tentative agreement to sell its Hummer sport utility vehicles unit to China's Sichuan Tengzhong Heavy Industrial Machinery. The U.S. automaker touted the memorandum of understanding with privately held Tengzhong, saying it would preserve American jobs and help the company emerge from bankruptcy. But the deal has observers in China worried.

"It will be difficult for Chinese to develop this well," said Liu Sheng Wang, Shenzhen-based analyst for China Merchant Securities, citing cultural barriers and differences in management.

Tengzhong will keep Hummer's core management and operations team and existing dealership network, according to the agreement. It will also clinch a long-term agreement to become a GM supplier. Tengzhong, which is based in Chengdu, in southwestern China's Sichuan province, manufactures heavy industry vehicles, highway and bridge components, construction machinery and energy equipment.

Tengzhou will invest in Hummer's brand and research and development to "allow Hummer to better meet demands for new products such as more fuel-efficient vehicles in the U.S.," according to a company statement. The companies did not disclose the price tag being negotiated.

It remains unclear how research and development and technology transfer will work, Liu said. "There have been no successful cases in the past" of such acquisitions. SAIC Motor's control of South Korea SUV maker Ssangyong Motor, which filed for bankruptcy in February, was a costly "defeat," he said. Others agreed, "Tengzhong has no passenger auto experience" and faces a two-fold challenge, said Li Chunbo, Beijing-based analyst for CITIC Securities.

While China's affluent class is growing rapidly and China looks set to be the first major economy to emerge from the global slump, the Hummer will be a difficult sell in China. GM will want to keep manufacturing based in the U.S., saying the Hummer deal would preserve 3,000 U.S. jobs, but that would inhibit Tengzhong from making Hummers more affordable by switching to cheaper Chinese labor, he said.

"If the cars are built in the U.S. and sold to China, that will be good for American employees, but the Hummer won't successfully enter the Chinese market," Li said. Hummer SUV's cost over $70,000, or about 478,000 yuan, which is more than what the average so-called affluent Chinese household makes in a year. Tengzhong's options are to maintain the U.S. plants or to partially move assembly to China, while complete relocation is only a possibility in the distant future, according to Li.

Whether U.S. customers will still want to buy a Chinese-owned brand is another issue, he added. The company's expertise in heavy industry won't contribute to the manufacturing and marketing prowess of the luxury SUV brand, Liu said.

Forbes.com
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