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GM deal to sell Hummer fails

Hummer bummer: GM is between a rock and a hard place on Hummer after its sales deal fell through.

GM to wind-down Hummer operations after deal with China’s Tengzhong falls through

25 Feb 2010

GENERAL Motors will begin winding down its Hummer brand after the deal to sell it to China’s Sichuan Tengzhong Heavy Industrial Machinery Co Ltd fell through.

The American auto giant announced overnight that Tengzhong was “unable to complete the acquisition” of Hummer, which in turn has prompted it to commence dismantling its Hummer operations.

The process could still see GM receive new bids for the military off-road brand, although the chances of a new deal being struck – and some 3000 jobs, mostly in the US, saved – are not believed to be strong.

“One year ago, General Motors announced that we were going to divest Hummer, as part of focusing our efforts on Chevrolet, Buick, GMC and Cadillac going forward,” said GM vice-president of corporate planning and alliances, John Smith.

“We have since considered a number of possibilities for Hummer along the way, and we are disappointed that the deal with Tengzhong could not be completed.

“GM will now work closely with Hummer employees, dealers and suppliers to wind down the business in an orderly and responsible manner.”

 center imageGM Holden spokesman Scott Whiffin told GoAuto that news of the aborted sale had come as a surprise to the Australian distributor, despite speculation in recent weeks that Tengzhong was have difficulty achieving final approval from the Chinese government.

“We don’t have a lot of detail but, on the face of it, it looks like we are going to move now to wind-down the business,” Mr Whiffin said. “It is disappointing news.

“As the local distributor, we will certainly be honouring warranties and continuing to provide service support and spare parts to current Hummer owners.

“Beyond that, in terms of where to from here, what might the timing be, how might this unfold, we just don’t have that detail yet. As of last night, the deal was more or less on track – so it’s news to us as well, and a disappointing outcome.”

GM Holden has advised that none of the Hummer’s 20 Australian retail outlets are standalone dealerships.

As GoAuto reported in December, GM Holden ceased importing Hummer (and Saab) vehicles around June last year, leaving dealers to simply run down stock levels as negotiations over the sale of the two brands continued overseas.

GM signed a “definitive agreement” to sell Hummer to Tengzhong in October, just a week after GM’s agreement to sell its Saturn brand to the Penske Automotive Group collapsed at the last minute.

Before then, the successful sale of Hummer had been in doubt since a preliminary agreement with Tengzhong was signed in June 2 – a day after GM filed for Chapter 11 bankruptcy protection in the US – as reports out of China indicated that Tengzhong faced a number of financial and regulatory hurdles.

Those hurdles, which included approval by Chinese government agencies, appear now to have not been entirely resolved as the October agreement indicated.

Under the terms of the agreement, Tengzhong was to purchase Hummer through an investment entity in which it holds an 80 per cent stake. A private entrepreneur, Suolang Duoji, whose holdings include the Hong Kong-listed chemical producer Lumena, was to hold the remaining 20 per cent stake.

Financial terms of the agreement remain undisclosed, but overseas reports have placed the purchase price at $US150 million ($A168 million).

Hummer is the last of GM’s four unwanted brands. The ‘New GM’ is winding down Pontiac and Saturn, and earlier this week completed the sale of Saab to niche Dutch supercar manufacturer Spyker.

In announcing that it had finalised the Saab deal with Spyker, Mr Smith said: “This transaction represents the successful outcome of months of hard work and intense negotiations, all aimed at securing a sustainable future for this unique brand, and we are pleased with the positive outcome.

“This is a great day for Saab employees, dealers and suppliers, and a great day for millions of Saab customers and fans worldwide.”

GM Europe president Nick Reilly added: “Throughout negotiations over the past year, GM has worked with many parties, including governments and investors, to find a solution for Saab.

“I’m very pleased that we could come to a positive conclusion, one that presents a viable future for Saab and preserves jobs in Sweden and elsewhere.”

Details of the Australian ramifications of the Saab deal – which will include the appointment of a new distributor – are still to be announced, Mr Whiffin confirmed today.

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