Hummer becomes Chinese owned

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The sale of Hummer to China’s Tengzhong was widely reported in both Chinese and foreign media reports late last night and early this morning.

The American automotive icon, equally famous and infamous for its go anywhere attitude and amazingly low gas mileage is now under the control of Sichuan based Tengzhong Heavy Industries. A final sale price has not yet been formally announced, but various media outlets are stating that the Hummer sale has netted GM a paltry 150 million USD.

One major stumbling block for both GM and Tengzhong maybe their lack of approval from their respective governments, the US government is more than likely to give GM the approval required to sell Hummer, whilst the Chinese government may take a more holistic approach to the approval of a Chinese buyout of Hummer, due to the governments pro-environment drive, and the lack of a comprehensive business plan for Hummer by Tengzhong.

The deal has given Tengzhong access to Hummer IPR, but will contract the factories and tooling from GM until 2011, and may extend into 2012. Tengzhong has also gained to Hummers American nationwide Hummer dealership.

It’s not entirely clear what Tenzhong have in store for Hummer, it could be that they begin production of Hummers in the PRC once the factory contract with GM expires, or they could introduce their own heavy lifting machines into Hummer dealerships in the USA.

GM Press Release:

General Motors and Tengzhong Sign Definitive Agreement For Sale of HUMMER

DETROIT and SICHUAN, Oct. 9, 2009 – General Motors (GM) and Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd (Tengzhong), today announced that the companies have entered into a definitive agreement that will allow Tengzhong to acquire GM’s premium all-terrain HUMMER brand.

Under the terms of the definitive agreement, the buyer will acquire the ownership of the HUMMER brand, trademark and tradenames, as well as specific IP license rights necessary for the manufacture of HUMMER vehicles. The buyer will also assume the existing dealer agreements relating to HUMMER’s dealership network.

Tengzhong intends to purchase HUMMER through an investment entity, in which it will hold an 80 percent stake. Mr. Suolang Duoji, a private entrepreneur with holdings that include the Hong Kong-listed thenardite producer Lumena, will hold the remaining 20 percent stake. Financial terms of the agreement were not disclosed.

The transaction is subject to customary closing conditions and regulatory approvals and/or review by government agencies in the U.S. and China. The completion of the definitive agreement enables the companies to continue and further the overall regulatory review process.

“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 Fritz Henderson, GM President and CEO. “For HUMMER, the combination of its knowledgeable leadership team, vehicle design expertise and the capital financing of Tengzhong portend a successful future.”

Under the agreement, HUMMER would contract vehicle manufacturing, key components and business services from GM during a defined transitional time period. For example, GM’s Shreveport assembly plant would continue to contract assemble the H3 and H3T and AM General’s Mishawaka assembly plant will continue to assemble the H2. Both facilities will produce the specified vehicles until June 2011, with an optional one year extension until June 2012. The deal is expected to secure more than 3,000 jobs in the U.S. related to the sale and manufacturing of HUMMER vehicles.

HUMMER will continue to be managed by members of its existing leadership team including James Taylor, who will remain in his current role as HUMMER’s chief executive officer. Prior to joining HUMMER, Taylor was General Manager of Cadillac where he oversaw a reinvigoration of the brand, leading key innovations in design and technology as well as the development of new models.

“We are fortunate to have a partner who understands and recognizes the importance of continuing investment in HUMMER’s heritage as a U.S.-based and branded company with a view toward capitalizing on global opportunities,” said Taylor. “Backed by a privately owned and well-capitalized 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 complete, HUMMER will become the first automaker to offer an alternative fuel powertrain in every model, with the addition of E85 FlexFuel capability in the 2010 H3 and H3T. HUMMER is also in the process of obtaining emissions certification for a diesel H3 that will be introduced in markets outside of North America. The brand’s future product development will focus on improving efficiency and performance in current HUMMER models with alternative fuel powertrains, more efficient gas engines, 6-speed transmissions and diesel engines.

“This transaction marks an exciting step for both Tengzhong and HUMMER, as we invest in a business that has significant opportunity in the U.S. and around the globe,” said Yang Yi, chief executive officer of Tengzhong. “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.”

Credit Suisse is acting as exclusive financial advisor and Shearman & Sterling is acting as international legal counsel to Tengzhong on this transaction. Citi is acting as financial advisor to GM.

For more information on the agreement go towww.transactioninfo.com/tengzhong.