GM reveals Hummer buyer
BY MARTON PETTENDY | 3rd Jun 2009
In one of the first major announcements to be made in the 24 hours since it officially filed for Chapter 11 bankruptcy protection in the US on Monday (June 1), GM said the sale of Hummer was expected to be concluded by the end of the third quarter, following a “static review” that has stretched back more than 12 months.
GM originally said that under the terms of the memorandum of understanding, the identity of Hummer’s new owner and the transaction price will not be revealed “at this time”, but confirmed the deal involved “plans by the investor to aggressively fund future Hummer product programs”.
But within another 24 hours GM said a “significant amount of speculation” about Hummer’s new custodian had persuaded it to reveal it will be Tengzhong, which is described as a manufacturer of heavy machinery equipment with a presence in special-use vehicles, road and bridge construction equipment and construction and energy industry equipment.
GM says the Sichuan Province-based Tengzhong will expand into the premium off-road vehicle segment through what will be a strategic acquisition for it, as well as “a catalyst for Hummer’s growth in the US and around the world”.
“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 Tengzhong CEO, Yang Yi.
“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 US.”As part of the proposed arrangement, which GM says should secure more than 3000 jobs in US manufacturing, engineering and at Hummer dealerships in North America, Hummer will continue to contract vehicle manufacturing and business services from GM “during a defined transitional time period”.
In the case of H3 and H3T production at GM’s Shreveport Assembly plant in Louisiana, GM said contract assembly would continue “through at least 2010”, but made no mention of H2 production in Indiana.
GM said Tengzhong will assume existing dealer agreements within Hummer’s dealership network, which will be expanded into “underserved” Hummer markets such as China, and that Hummer would continue to be headquartered in the US.
The Wall Street Journal had previously reported all US Hummer manufacturing facilities were safe. The H3 is also assembled in South Africa, while the H2 is built in small numbers in Russia by Avtotor.
GM said the Hummer sell-off was subject to customary closing conditions, including receipt of applicable regulatory approvals. It said Citi acted as its financial adviser in the transaction, which could be subject to further specific terms and conditions, while Credit Suisse acted on Tengzhong’s behalf.
It will not include the rights to produce the iconic ‘High Mobility Multipurpose Wheeled Vehicle’ (better known as the US Army’s Humvee), which will continue to be built by AM General.
Reuters reported in early April that three bidders were in the running for Hummer, including one in the US, as well as both private equity interests and wealthy individuals, none of them current auto-makers.
Autocar had previously linked Hummer with Russian billionaire Oleg Deripaska, the controller of Russian aluminium company RusAI and auto-maker GAZ, which produces the 2330, a Hummer-style vehicle for the Russian military, and the BTR-90, an eight-wheeled armoured vehicle.
Sales of about 27,485 civilian versions of AM General’s original Humvee military vehicle – the H1 and its (relatively) smaller siblings, the H2 and H3 – were down 51 per cent in the US last year.
The H3 was officially launched in Australia when Hummer joined Saab as one of Holden’s ‘GM Premium Line’ brands in October 2007, since when more than 1600 examples have now been sold here. At 271, however, H3 sales are down 53.2 per cent to April this year.
Before yesterday’s Hummer announcement, GM Holden chief Mark Reuss said the future of GM’s Hummer and Saab operations in Australia, including their administration and dealer networks, would be worked through with their buyers.
“Those two brands are for sale now,” he said. “After they are sold we will work with whoever the buyer is of those brands about what to do here in Australia.”Hummer’s future as a global brand now appears locked in, but as it enters bankruptcy court proceedings GM continues to court buyers for its Swedish subsidiary, Saab, as well as Saturn, which was most recently linked with a joint venture between Penske Automotive Group and Nissan Motor Co.
GM this week confirmed its European brands, Germany’s Opel and the UK’s Vauxhall, would be majority-controlled by Canadian components maker Magna and Russian state-owned bank Sberbank.
In a cruel blow to the increasingly popular Commodore-based Pontiac G8 in the US, GM said in late April that Pontiac would cease to exist as a new-car brand beyond 2010, making it the first of six brands GM said it would close or offload as part of its survival plan.
“Today Hummer is a globally recognised brand with excellent growth prospects, both in terms of new markets and new products for our existing markets,” said Hummer CEO James Taylor.
“The proposed agreement will enable us to continue that growth and maximise the brand’s potential through new, innovative off-road vehicles with improved efficiency and alternative fuel powertrains,” he said.
“With Tengzhong’s investment and strong support, we will be able to make our visions a reality. This transaction, if successful, will secure more than 3000 US jobs, and allow us to embark on a more aggressive global expansion, ensuring a successful future with our new partners.
“Today’s announcement is great news for Hummer’s current and future customers, dealers, suppliers and employees around the globe.”GM North America president Troy Clarke said the sale of Hummer was good for GM.
“Hummer is a strong brand. I’m confident that Hummer will thrive globally under its new ownership. And for GM, this sale continues to accelerate the reinvention of GM into a leaner, more focused, and more cost-competitive auto-maker,” he said.
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