GM contacting previous Chinese parties interested in Hummer

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Although the GM-Tengzhong deal is effectively dead, GM is still eager to offload the dying brand to a Chinese company according to the below Reuters report. Hummer could be a good buy for a Chinese company, as long as they have the right attitude to the purchase and a plan to win over the Chinese government that ultimately has the say over any 100 million dollars and over overseas investment.

From Reuters:

DETROIT/HONG KONG, Feb 26 (Reuters) – General Motors [GM.UL] has approached previous bidders for its Hummer unit after a deal to sell the brand to an obscure Chinese firm collapsed, a source with knowledge of the matter said on Friday.

GM has reached out to the companies whose offers for the military-derived SUV line were turned down last year when the U.S. automaker agreed to sell Hummer to Sichuan Tengzhong Heavy Industrial Machinery, said the source, who declined to be identified because the discussions are private.

At least four Chinese companies were among the firms GM contacted to gauge their interest in recent days, the source said, declining to give specific names.

Two had expressed interest in buying only part of Hummer’s assets last year, such as tooling and equipment at GM’s Hummer plant in Shreveport, Louisiana, the source said. The other two had made offers for the brand.

The No.1 U.S. automaker said on Wednesday it would shut down Hummer after Tengzhong’s $150 million bid to buy the money-losing brand collapsed, reportedly due to opposition from Chinese regulators. At that time GM said it would continue to entertain viable offers early in the wind-down process.

Analysts said any Chinese bidder is unlikely to try to take over all of Hummer after the failed Tengzhong bid, but added that some could potentially try to buy some of Hummer’s assets.

“I don’t think any mainstream Chinese automaker will be interested in a brand like Hummer, but I won’t rule out there might be some obscure players like Tengzhong that are interested just because they want to squeeze into the auto industry,” said Boni Sa, a China-based analyst with CSM Worldwide.

“Still I am not sure anyone has the guts to challenge Beijing after it just killed the (Tengzhong) deal,” he said.

GM representatives were not immediately available for comment.

Sa added that Hummer’s tooling equipment is relatively specialised, making it less attractive for Chinese carmakers than equipment being shopped from other distressed vehicle makers on the global stage.

GM put Hummer up for sale initially in the summer of 2008, a full year before GM itself fell into a government-supported bankruptcy reorganisation that saw it plan to divest Hummer, Saturn, Saab and a controlling stake in its German Opel unit.

GM had been trying to complete a deal with Tengzhong by the end of February after reaching a definitive agreement in October to sell Hummer to the little-known heavy machinery company based in Sichuan province.

The collapse of the deal represents another setback for GM, which had been working to shed unprofitable brands and focus on its four core brands — Chevrolet, Cadillac, Buick and GMC — after emerging from bankruptcy in July.

Closure of Hummer would affect about 3,000 jobs, including manufacturing workers, dealers, staff members, and other, GM spokesman Nick Richards said. The brand has 153 U.S. dealers.

The purchase of some of Hummer’s assets might make sense for some Chinese companies, which are eager to gain world-class technology to make their products more competitive on the global stage.

Late last year, Beijing Automotive Industry Holding Corp (BAIC) paid $200 million for designs of some old Saab models. Dutch sportscar maker Spyker later took over the rest of Saab from GM, including the know-how behind the recently developed 9-5 car series.

Hummer obviously still has its US factory and dealership network intact, this could be a fantastic moment for a Chinese company to step in and shoulder the burden of Hummer sales for a year whilst they build their own Hummer range, which could be a strong and tough range of models. However, building a range of trucks and SUVs that are upto the Hummer name may take a few years for a Chinese company. The obvious candidate for the Hummer brand would be a Chinese truck or SUV company such as Foton or Dongfeng (both light and heavy truck manufacturers with swelling coffers) or even Greatwall Automobile.

The chances for Chinese companies are there, and it must be remembered that Hummer was going at firesale prices befor the Tengzhong deal fell through, the current asking price for Hummer may well be to just take it of GM’s hands as it is.