GM signs Hummer sale deal with China’s Tengzhong

THE future of Hummer in Australia, including its management and retail operations, remains unclear after General Motors last week signed a “definitive agreement” to sell the military off-road brand to China’s Sichuan Tengzhong Heavy Industrial Machinery Co.

The conclusion of the deal to sell Hummer came a week after GM’s agreement to sell its Saturn brand to the Penske Automotive Group collapsed at the last minute.

The successful sale of Hummer has also been in doubt since a preliminary agreement was signed on 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 appear to have now been resolved, with Tengzhong set 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, will hold the remaining 20 per cent stake.

Financial terms of the agreement have not been disclosed, but overseas reports place the purchase price at $US150 million ($A166 million).

Under the agreement, which is still subject to final approval by government agencies in the US and China, Tengzhong will acquire ownership of the Hummer brand, trademark and trade names, as well as specific intellectual property rights necessary for the manufacture of Hummer vehicles.

GM Holden is responsible for Hummer through its ‘Premium Channel’ – an umbrella term that also includes Saab (which is also about to be sold) and Cadillac (which is no longer coming here) – and has this week stuck to the line that it was “business as usual” until the final regulatory approvals were made.

“At this stage ... there is no change to the dealer network or the distribution channel,” GM Holden spokesman Scott Whiffin told GoAuto. “Closing of the sale process in the US is contingent on regulatory approvals in both the US and China.

“In Australia there are no changes for customers or dealers to sales and service arrangements. Likewise, warranty agreements will continue to be honoured.”

In a statement, GM said Tengzhong would assume the existing dealer agreements relating to Hummer’s retail network. It will also contract vehicle manufacturing, key components and business services from GM during a “defined transitional time period” which is still to be divulged.

It is known that GM’s Shreveport plant in the US will continue to build the Hummer H3 and H3T until June 2010, with an optional 12-month extension. The same applies for H2 production at AM General’s Mishawaka plant.

However, the future of Australian-sourced H3s, which are built in South Africa, is still to be determined.

Year-to-date, H3 sales are down a massive 56 per cent in Australia, with just 400 sold across the nation to the end of September. Just 12 were sold last month.

“Hummer is a strong global niche brand and this agreement signifies another important milestone in writing the next chapter for both GM and Hummer,” said GM chief executive Fritz Henderson. “For Hummer, the combination of its knowledgeable leadership team, vehicle design expertise and the capital financing of Tengzhong portend a successful future.”

Hummer chief executive (and former Cadillac general manager) James Taylor will remain in the role under Tengzhong ownership. Other senior managers will also be retained.

“We are fortunate to have a partner who understands and recognises the importance of continuing investment in Hummer’s heritage as a US-based and branded company with a view toward capitalising on global opportunities,” said Mr Taylor.

“Backed by a privately owned and well-capitalised company, we are going to be able to focus on providing customers with more efficient models that deliver Hummer’s promise of authentic, purpose-built design and engineering.”

Once the transaction is completed, Hummer will add E85 ethanol capability on the 2010 H3 and H3T models. It is also in the process of obtaining emissions certification for a diesel H3 for introduction in markets outside North America.

More efficient petrol engines and six-speed automatic transmissions also figure in the brand’s future.

Tengzhong chief executive Yang Yi said: “This transaction marks an exciting step for both Tengzhong and Hummer, as we invest in a business that has significant opportunity in the US and around the globe.

“We are excited about some of the initiatives already underway at Hummer that we believe our investment will be able to accelerate, particularly related to the creation of the next generation of more fuel-efficient vehicles to meet not only future regulations but also customer expectations.”

Tengzhong is a privately owned engineering company that manufactures heavy machinery equipment “with a presence in special-use vehicles, road and bridge construction equipment and construction and energy industry equipment”.