Sichuan Tengzhong to Complete Hummer Purchase in Months

飞雪寒冰

Sichuan Tengzhong Heavy Industrial Machinery Co.'s acquisition of General Motors Corp.'s Hummer brand will be completed in December or next January, the Chengdu-based company's general manager Yang Yi told Caijing on Oct. 10.

Tengzhong has submitted an application for the deal, which Caijing earlier reported to be worth about US$150 million, to the provincial branch of the Ministry of Commerce in Sichuan, Yang said in a telephone interview.  

The deal must first pass muster at province level before it is passed up for approval to the commerce ministry in Beijing. An official with the ministry's overseas investment department told Caijing Oct. 9 that it had yet to receive an application from Tengzhong.  

The purchase also requires regulatory approval from China's State Administration of Foreign Exchange, as well as U.S. regulators, according to Yang.  

If all the necessary approvals are granted, the deal would be the first high-profile acquisition of an American auto brand by a Chinese company.

飞雪寒冰

However, regulators must first be convinced that Tengzhong, which produces heavy-duty trucks and machinery for road maintenance, can make the brand profitable. The onus is also on Tengzhong to prove that it has plans to adapt the Hummer range to improve its environmental credentials, in line with China's national plan to raise energy efficiency by 4 percent over five years.

"We are excited about some of the initiatives already underway at Hummer that we believe our investment will be able to accelerate, particularly in relation to the creation of the next generation of more fuel-efficient vehicles to meet not only future regulations but also customer expectations," Yang was quoted as saying in an Oct. 10 statement.

The transaction will be conducted via an investment vehicle, in which Tengzhong will hold an 80 percent stake, and Suolang Duoji, chairman of chemical firm Lumena

Resources Corp. (HKEX: 00067), the remainder, the statement said. Hummer's management team will be retained, and for a transitional period the brand will contract vehicle manufacturing, key components and business services from GM.

飞雪寒冰

Yang told Caijing in June that the machinery maker intended to use internal funds and bank loans to finance the purchase. He did not elaborate following the Oct. 10 announcement, saying only that discussions are ongoing and the final price of the deal was not agreed "until the last minute."

Yang said he expects demand for Hummer's in China to increase in line with the country's increasingly affluent urban population. He said recently Tengzhong will focus on stabilizing Hummer's management structure and supply networks rather than immediately seeking to increase sales.  

Hummer sold 10,000 vehicles worldwide in the first half, down 54.1 percent year-on-year, according to GM. Sales in the Asia-Pacific area including China plunged 52 percent from a year earlier to just 503 units in the first six months.  

Lumena Resources Corp. closed down 1.6 percent at HK$3.06 on Oct. 9 in Hong Kong.

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