Skip to main content

A visitor looks at a Hummer during a local automobile exhibition in Shenyang, Liaoning province, in China.

China's Tengzhong may finalize a deal to buy General Motors Co.'s Hummer business for about $150-million (U.S.) on Friday, a source familiar with the deal said, China's biggest brand acquisition since Lenovo bought IBM's PC unit in 2005.

A completed deal would also mark the first major acquisition of distressed U.S. auto assets in the global downturn by Chinese firms seeking to acquire high-profile names and Western technology.

"GM and Tengzhong may close the deal as early as today," the source with knowledge of the talks told Reuters. GM declined to comment and Tengzhong could not be reached immediately for comment.

Story continues below advertisement

The Hummer sale is part of a drastic restructuring plan by the Detroit auto maker, which also involves the disposal of its Saab, Opel and Saturn operations as part of a government-sponsored bankruptcy recovery plan.

Sichuan Tengzhong Heavy Industrial Machinery, a little known heavy machinery maker, has been in detailed negotiations with GM since it announced an initial plan in June to acquire the rights to the premium off-road Hummer brand from its U.S. owner.

Tengzhong still needs approval from the Chinese government, including the Ministry of Commerce, which industry and government officials say holds the ultimate authority over the deal.

"I think the Tengzhong-Hummer deal is very likely to go through as commerce ministry officials had said repeatedly that overseas acquisitions would be rational behaviour amid the global financial crisis," said Yi Junfeng, an analyst with Changjiang Securities.

Many of China's fledgling automakers, including Geely Automobile Holdings, are keen to establish a global profile and secure quick access to technology, and are taking a look at established global brands put up for sale by industry giants struggling to survive the recent slump.

They have often confronted obstacles to buying nationally prominent overseas names, however, with media reporting of opposition in Sweden to a sale of Ford Motor's Volvo car unit to the Chinese. Geely had in September confirmed its interest in the Swedish brand.

Other Chinese industries have also confronted problems in their efforts to acquire Western brands and assets.

Story continues below advertisement

Deals for sensitive U.S. technology and energy assets have been derailed by political opposition, with even the successful $1.25-billion purchase of IBM's PC business by Lenovo Group in 2005 running into issues. The U.S. State Department limited the use of thousands of computers purchased from Lenovo due to security concerns.

Tengzhong, which harbours ambitions to break out of its southwest China base where it makes infrastructure equipment, is expected to retain Hummer's existing senior management and operational team, saving more than 3,000 U.S. jobs, according to terms of a preliminary agreement.

It will also keep the dealership network of the U.S. sport utility vehicle unchanged. Hummer is currently sold in more than 30 countries, including China.

Bankers familiar with the situation have said Hummer could fetch about $100-million of cash in addition to other commitments, far less than the $500-million GM had expected Hummer to bring when it went on sale in June 2008.

It would also be the first successful purchase of a famed Western auto brand by a Chinese company following recently aborted acquisition attempts by other Chinese auto groups, including Beijing Automotive Industry Holdings' (BAIC) failed bid for Opel.

BAIC was shut out of GM's discussions with other bidders for Opel but later reached a tentative pact to take a minority stake in Swedish luxury sports car maker Koenigsegg, which had struck a deal to take over loss-making Saab from GM.

Report an error
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter
To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies