ct. 9 (Bloomberg) -- General Motors Co. agreed to sell its Hummer sport-utility vehicle brand to China’s Sichuan Tengzhong Heavy Industrial Machinery Co. and another investor, nine days after an accord to unload the Saturn unit collapsed.
Tengzhong intends to buy Hummer through an investment group in which it will hold 80 percent, and Suolang Duoji will hold the rest, the companies said in a statement on GM’s Web site. Duoji’s holdings include Hong Kong-based Lumena Resources Corp.
Disposing of Hummer is a victory for GM in its post- bankruptcy restructuring after the sale of the Saturn unit to Penske Automotive Group Inc. fell through last week. GM is shutting Saturn and Pontiac and is close to a deal with Sweden’s Koenigsegg Group to acquire the Saab brand. Hummer is being sold for $150 million, people familiar with the deal said yesterday.
“It’s important for GM to get some cash, without a doubt,” said Joseph Phillippi, president of AutoTrends Consulting Inc. in Short Hills, New Jersey. “Any appreciable amount they can get means more reserves, means keeping your powder dry until this economy improves.”
For Tengzhong, the deal propels the industrial manufacturer into the global auto market. It aims to expand Hummer’s reach beyond the core U.S. market, Tengzhong Chief Executive Officer Yang Yi said in an interview.
“We are really looking to expand our global reach to tackle some of the high-growth markets, particularly the China market, in which we expect to enjoy explosive growth,” Yang said through a translator.
Planning Next Week
Hummer will remain based in southeastern Michigan. It will begin operations with about 100 to 150 people, Taylor said. The next step would be to hire about 200 engineers, he said. The company plans to continue contracting with GM for vehicle production from Mishawaka, Indiana, and Shreveport, Louisiana, for two to three years, CEO Jim Taylor said in an interview.
Hummer aims to resume exports to Europe, the Middle East and Russia, Taylor said. It will probably take five or six months to adapt vehicles to Chinese regulations before Hummer can export significantly to that market, Taylor said.
Tengzhong and Hummer executives will meet in China next week to discuss the brand’s product, manufacturing and expansion plans, Taylor said.
Rising gasoline prices helped erase U.S. demand for the full-size SUVs made by Hummer, whose value GM had projected at $500 million in court documents this year. GM left Chapter 11 on July 10 and is keeping its Chevrolet, Cadillac, Buick and GMC brands in the U.S.
Protecting Jobs
Closely held Tengzhong and GM had said the accord would protect more than 3,000 U.S. corporate, manufacturing and dealership jobs. The sale agreement caps talks that Chengdu, China-based Tengzhong had disclosed in June.
Hummer’s dealer accords and senior management team will be taken over by Tengzhong, a maker of special-use vehicles, structural parts for highways and bridges, and construction machinery.
Credit Suisse is the financial adviser and Shearman & Sterling LLP is international legal counsel to Tengzhong. Citigroup Inc. is advising Detroit-based GM.
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, who is now California’s governor.
H1 production ended in 2006, when Hummer’s U.S. deliveries peaked at 71,524, according to Autodata Corp. U.S. sales of the SUVs fell 51 percent in 2008, when retail gasoline reached a record $4.11 a gallon, and 63 percent this year through September. The cheapest model, the H3, starts at about $31,000.
GM signs deal to sell Hummer to Chinese company
General Motors Co. has inked a deal to sell its premium off-road brand Hummer to a Chinese industrial company.
GM said on Friday that it has a definitive agreement with Sichuan Tengzhong Heavy Industrial Machinery Co. for 80 percent of Hummer. A private investor would buy the remaining stake.
Under the terms of the deal, GM would continue to build the H3 and the H3T until June 2011 on a contract basis. AM General would assemble the H2 for the Chinese owners for that time period as well. The deals have an option to be extended until June 2012.
Financial terms were not disclosed, but GM would reportedly get $150 million. It's still subject to closing conditions and regulatory approvals.
James Taylor, the CEO of Hummer, will stay on and lead the company under its new ownership. He previously was the Cadillac general manager and oversaw that brand's revival.
“Hummer is a strong global niche brand, and this agreement signifies another important milestone in writing the next chapter for both GM and Hummer,” GM CEO Fritz Henderson said in a statement. “For Hummer, the combination of its knowledgeable leadership team, vehicle-design expertise and the capital financing of Tengzhong portend a successful future.”
The deal could secure about 3,000 jobs in the United States, and Tengzhong would get access to the Hummer dealer network.
Hummer said it plans to add FlexFuel capability to the 2010 H3 and H3T and will sell a diesel H3 outside of North America. The brand also is looking at more options for fuel efficiency, including alternative powertrains and six-speed transmissions.
The agreement is another milestone for GM as it restructures in the wake of its historic bankruptcy. The automaker is shuttering Pontiac and Saturn and trying to sell Opel and Saab. That leaves GM with four core U.S. brands: Chevrolet, Cadillac, Buick and GMC.
Tengzhong will get an 80 percent stake in the company, while Hong Kong investor Suolang Duoji, who indirectly owns a big stake in Tengzhong through an investment company, will get 20 percent. The investors will also get Hummer's nationwide dealer network.
Financial terms were not disclosed, although a person briefed on the deal said the sale price was around $150 million. The person did not want to be identified because the terms were being kept private. GM's bankruptcy filing last summer said that the brand with military roots could bring in $500 million or more.
Suolang Duoji also is the controlling shareholder and chairman of Lumena Resources Corp., a Hong Kong listed mining company.
GM and Tengzhong said in a statement that the transaction still must be approved by the U.S. and Chinese governments. Chinese regulators initially expressed reservations about Tengzhong's ability to run such an enterprise.
Hummer's current management team will stay with the new company, which will be headquartered either in Detroit or suburban Auburn Hills, Mich.
James Taylor, the GM executive who has run Hummer recently, will remain as its chief executive officer.
Taylor said in an interview with The Associated Press that he knows resurrecting the brand will be difficult, but the key will be quickly rolling out more fuel efficient models that get over 20 mpg.
"I'm not in any kind of denial that we have a very steep uphill challenge in front of us," Taylor said.
Hummer, he said, has been in a state "suspended animation" since June 2008 when GM announced it would be reviewed for sale or closure. Since then, its future has been uncertain and it got no marketing support or new products. Financing for leases, a big part of its luxury market, also dried up, Taylor said.
Still, GM sold 1,000 Hummers in some months, proving that buyers are out there.
"There's still a loyal customer base underneath there that loves Hummer," he said.
Hummer hopes to keep buying fuel-efficient engines and transmissions from GM, but can seek them elsewhere, Taylor said.
He said the brand has been unfairly tagged as a symbol of the American gas guzzler, saying other vehicles get worse mileage.
He wants to make sure "at least we aren't a victim of misinformation that we stand alone as the ultimate bad guy in the space, which we aren't."
Hummer, whose smallest model gets 16 miles per gallon (14.7 liters per 100 kilometers) in combined city and highway driving, sold well until the middle part of this decade when fuel prices began to rise. Sales peaked at 71,524 in 2006.
But only 8,193 Hummers have been sold in the U.S. through the first nine months of the year. That's down 64 percent from a year earlier. And only 426 Hummers were sold nationwide last month, according to Autodata Corp.
GM, which spent 40 days in bankruptcy protection during the summer and has received about $50 billion in U.S. government aid, also plans to sell its Saab brand and scrap Pontiac and Saturn as it tries to streamline its operations.
The company wants to focus on four core brands: Chevrolet, Cadillac, Buick and GMC.
With backing from a well-capitalized company, Hummer will now focus on improved efficiency and performance and include alternative fuels, more efficient gas engines, six-speed transmissions and diesel engines.
GM said its assembly plant at Shreveport, La. would continue to assemble the commercial Hummer H3 and H3T pickup trucks on a contract basis until June 2011, with a one-year option until June 2012. The military H2 version will continue to be assembled by AM General in Mishawaka, Ind., under the same terms.
South Bend, Ind.-based AM General retains ownership of the military versions of the vehicles, which have been used frequently in Afghanistan and Iraq.
The Shreveport GM plant is currently slated to close by June 2012. For the time being, the plant also is assembling the Chevrolet Colorado and GMC Canyon pickup trucks.
The plant once employed about 3,000 workers, but layoff and buyouts have reduced that number to just over 700.
Friday, 9 October 2009
GM Agrees to Sell Hummer Brand to China’s Tengzhong
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