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Automaker News
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Tuesday, 02 June 2009 22:27 |
 June 2 (Bloomberg) -- General Motors Corp. and Sichuan Tengzhong Heavy Industrial Machinery Co. Ltd., a Chinese equipment maker, confirmed details of their proposed transaction for Tengzhong to acquire the Hummer sport-utility vehicle brand.
Tengzhong will take on Hummer’s dealer agreements and a senior management team, the companies said in a statement. The idea is that the two companies will form a long-term contract assembly and supply agreement. The deal should be completed by the end of the third quarter. If successful, the deal would secure more than 3,000 U.S. jobs, GM has said.
GM, which filed for bankruptcy protection yesterday, wants to shed Hummer and three other U.S. brands and leave court protection as a leaner, more profitable company.
“It’s a little surprising that a non-vehicle company has gotten themselves involved as opposed to one of the many Chinese vehicle companies,” said Joseph Phillippi, president of AutoTrends Consulting Inc. “But then again, these guys know manufacturing, it makes some sense.”
Hummer is worth an estimated $500 million, Chief Executive Officer Fritz Henderson said in bankruptcy court documents.
At least one other party is still interested in buying Hummer, though those talks are on hold, said a person familiar with the talks.
Tengzhong is a privately owned maker of special-use vehicles, structural components for highways and bridges, and construction machinery, according to its Web site.
Credit Suisse is acting as financial adviser and Shearman & Sterling is serving as international legal counsel to Chengdu, China-based Tengzhong. Citigroup Inc. is acting as financial adviser to Detroit-based GM.
Shedding Brands
GM won approval in its first day in bankruptcy court to sell assets as soon as next month after collapsing under $172.8 billion in debt and failing to adapt to consumer demands for models that use less fuel.
Disposing of Hummer is part of GM’s effort to shed half of its eight U.S. brands and leave court protection as a leaner, more profitable company. The automaker wants to shed its Hummer, Saturn and Saab brands and plans to wind down the Pontiac line.
Sixteen potential buyers expressed interest in Saturn, Chief Financial Officer Ray Young said in a conference call today.
Hummer History
GM bought the license for the Hummer brand from AM General in 1999 and started selling the $140,000 H1, a 7,600-pound (3,400-kilogram) SUV patterned after the all-terrain military vehicle popularized for road use by actor Arnold Schwarzenegger, now California’s governor.
While the H1 never sold more than 875 units a year, the model won enough of a following for GM to add the 6,600-pound H2 in 2002. The 4,700-pound H3 followed in 2005. GM also started building the H3 in South Africa in 2006 for Europe, the Middle East and Africa.
Rising gasoline prices eventually eroded demand. GM halted production of the H1 in 2006 as sales dwindled.
Hummer’s U.S. deliveries peaked at 71,524 that year, according to Autodata Corp. U.S. sales of the SUVs, which start at about $31,000 for the H3, fell 51 percent in 2008 and 67 percent this year through April.
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