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GM sells Hummer to Tengzhong

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AP source: GM to sell Hummer to Chinese company.

General Motors Corp. took a key step toward its downsizing on Tuesday, striking a tentative deal to sell its Hummer brand to a Chinese manufacturer, while also revealing that it has potential buyers for its Saturn and Saab brands.

GM has an agreement to sell its Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery Co. of China, said a person briefed on the deal.

The Detroit automaker announced Tuesday morning that it had a memorandum of understanding to sell the brand of rugged SUVs, but it didn't identify the buyer. A formal announcement of the buyer was to be made Tuesday afternoon, said the person briefed on the deal. The person spoke on condition of anonymity because the details have not been made public.

Sichuan Tengzhong deals in road construction, plastics, resins and other industrial products, but Hummer would be its first step into the automotive business.

GM said the sale will likely save more than 3,000 U.S. jobs in manufacturing, engineering and at various Hummer dealerships.

As part of the proposed transaction, Hummer will continue to contract vehicle manufacturing and business services from GM during a transitional period. For example, GM's Shreveport, La., assembly plant would continue to contract to assemble the H3 and H3T through at least 2010, GM said.

The automaker also said Tuesday that it has 16 buyers interested in purchasing its Saturn brand, while three parties are interested in the Swedish Saab brand.

Chief Financial Officer Ray Young told reporters and industry analysts on a conference call that GM is continuing to pursue manufacturing agreements with a new Saturn buyer.

GM would like to sell the money-losing Saturn brand's dealership network, contracting with the new buyer to make some of its cars while the buyer gets other vehicles from different manufacturers.

At the same time, bridge loan discussions with the Swedish government are progressing, Young said.

GM, which filed for Chapter 11 bankruptcy protection in New York on Monday, is racing to remake itself as a smaller, leaner automaker. In addition to its plan to sell the Hummer, Saab and Saturn brands, GM will also phase out its Pontiac brand, concentrating on its Chevrolet, Cadillac, Buick and GMC nameplates.

The company hopes to follow the lead of fellow U.S. automaker Chrysler LLC by transforming its most profitable assets into a new company in just 30 days and emerging from bankruptcy protection soon after.

But GM is much larger and complex than its Auburn Hills-based rival and isn't up against Chrysler's tight June 15 deadline to close its deal with Fiat Group SpA.

Sharon Lindstrom, managing director at business consulting firm Protiviti, said the companies pose different challenges. But as with Chrysler, she notes that the Treasury Department made sure many of GM's moving parts were in order ahead of time so a quick bankruptcy reorganization might be possible.

"They had a lot of their ducks in a row because the terms of the government financing forced them to get all the parties to the table in a very, very short period of time," Lindstrom said.

Separately, the German government said Tuesday it paid out the first euro300 million ($425 million) in bridge loans to GM's Adam Opel GmbH division. The loans are part of a deal to shrink GM's stake in Opel and shield it from GM's bankruptcy protection filing in the U.S.

Canadian auto supplier Magna International Inc. and Russian-owned Sberbank will acquire 55 percent of Opel.

A sale of the Hummer brand had been expected. Chief Executive Fritz Henderson had said in April that the automaker was expecting final bids from three potential buyers within the month.

Eric Lane, vice president of Baton Rouge, La.-based Gerry Lane Enterprises, which has four dealerships — including one offering Hummers — welcomed the sale.

"Even though they've put out a fantastic product, they haven't come out with enough new models to keep up," said Lane. "We'd like a new owner to come in and inject some new products."

Lane said the lack of new products and the recession figured into the Hummer equation much more than last year's runup in gasoline prices. "I haven't had a single owner complain about mileage. Nobody buys a Hummer because of the gas. You don't buy a vehicle for $60,000 and worry about the price of gas."

Critics had seized on the rugged but fuel-inefficient Hummer as a symbol of excess as GM's financial troubles grew and gas prices rose. Sales at Hummer, which is known for models with military-vehicle roots, have been in a steep slide since gasoline prices rose to record heights last summer. For the first four months of this year, Hummer sales are down 67 percent.

GM nailed down deals with its union and a majority of its bondholders and arranged the Opel deal in order to appear in court Monday with a near-complete plan to quickly emerge with a chance to become profitable.

The government has said it expects GM to come out of bankruptcy protection within 60 to 90 days. By comparison, the judge overseeing Chrysler's case approved the sale of its assets to a group led by Italy's Fiat in just over a month. Some industry observers think Chrysler could emerge as early as this week.

During Monday's hearing, GM attorney Harvey Miller stressed the magnitude of the case and the importance of moving GM through court oversight as fast as possible. He noted that the automaker only has about $2 billion in cash left.

"If there's going to be a recovery of value, it's absolutely crucial that a sale take place as soon as possible," Miller said in his opening statement.

The automaker wants to sell the bulk of its assets to a new company in which the U.S. government will take a 60 percent ownership stake. The Canadian government would take 12.5 percent of the "New GM," with the United Auto Workers union getting 17.5 percent and unsecured bondholders receiving 10 percent. Existing shareholders are expected to be wiped out.

U.S. Judge Robert Gerber moved swiftly through more than 25 mostly procedural motions during the automaker's first-day Chapter 11 hearing.

Gerber set GM's sale hearing for June 30, putting it on a path similar to that of Chrysler. Objections are due on June 19, with any competing bids required to be submitted by June 22.

Gerber also gave GM immediate access to $15 billion in government financing to get it through the next few weeks, and interim approval for use of a total $33.3 billion in financing, with final approval slated to be ruled on June 25. The funds are contingent on GM's sale being approved by July 10. Gerber also approved motions allowing the company to pay certain prebankruptcy wages, along with supplier and shipping costs.

The sheer size of GM makes it a more complicated case than Chrysler.

GM made twice as many vehicles as Chrysler's 1.5 million last year and employs 235,000 people compared with Chrysler's 54,000. GM also has plants and operations in many more countries, meaning it will likely have to strike separate deals to navigate the bankruptcy laws of those places.

Henderson said GM has learned a few things by watching Chrysler's case.

"Certainly the court showed that it can address 363 (sale) transactions in an expeditious fashion," Henderson said at a news conference Monday. "Particularly in our case with what will be a very large 363 transaction."

GM's filing for Chapter 11 bankruptcy protection is the largest ever for an industrial company. GM, which said it has $172.81 billion in debt and $82.29 billion in assets, had received about $20 billion in low-interest loans before entering bankruptcy protection.
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How GM wanted to sell Hummer to Tengzhong

From China Car Times:
On February 26nd, GM announced that the sale of Hummer to Tengzhong Heavy Industries was dead due to a deal not being made within the allotted time frame. GM announced that they would be winding down the Hummer business over the course of the year, but they said the same of Saab which ultimately was saved at the last minute by Spyker, so could it be that Hummer gets saved from the hangman’s noose at the last minute as well?

Actually, from early 2008 GM was actively courting Beijing Automotive Industry Corporation (BAIC) to take over the Hummer brand, it would have been a match made in heaven with BAIC desperately seeking a foreign brand to buy and also having a large light weight truck manufacturing set up, and the fact that they are already an active supplier of light weight SUV’s to the Peoples Liberation Army. For whatever reasons, BAIC or GM ended the plan for a BAIC-Hummer takeover, and the deal fell into Tengzhong’s lap.

Chinese consumers were largely happy to hear of the news that Humvee’s would seen be produced in China thanks to Tengzhong, but Humvees remain a very different beast from the civilian editions, however civilian Hummers such as the H2 and even H3 may have some application for remote outposts such as Tibet, Xinjiang and even along the mountainous southern Chinese border with China’s south Asian neighbors.

Hummer shared its factory production line with various Chevrolet SUV and pick up models, and didn’t really have its own independent factory and production line, especially the Hummer H2, which coincidentally shared a lot of parts with GM produced pick up trucks.

Humvee’s were never up for sale, the tech for Humvees was never sale, all that GM was offering was a Chevy Truck with a new shell. The sale of Hummer never included the rights to the technology or the production lines as the tech was shared with Chevy trucks, so there was no way that Hummer could be sold as a stand alone product.

In fact, the only thing that GM was offering for sale was the Hummer design, branding, supply chain network, dealership network, as well as the burden of retired workers and paying into existing workers retirement schemes. Also, as soon as a company took over Hummer they were expected to continue operating the American factory for a minimum of three years. Although the Hummer brand is well known, its fame has changed from fame to infamy over the past 20 years, the images of Marines liberating Kuwaitis from their Humvees disappeared from our screens practically overnight and were replaced with stories of 21 year old frat boys with chrome wheeled H2’s struggling to afford gas for their H2. As a result, the Hummer brand became the ultimate bad boy for the Green lobby, and just as China was trying to flex its Green muscles, Tengzhong announces to the world its planning to buy Hummer.

BAIC pulled out of the Hummer deal in late 2008, but by June 2009 Tengzhong and GM were deep in talks, GM were apparently keen to point out to Tengzhong that the sale of Hummer was just a concept at that stage, talks continued until a memorandum of understanding was signed, but this ultimately died off in February 26th 2010 due to a lack of a final agreement being reached.

It has been said that the Chinese government were not keen to support the Tengzhong purchase of Hummer due to its lack of green credentials, but it could have been that Tengzhong realized they weren’t getting much for their purchase from GM, after all who wants to buy an empty factory, and a SUV that fell from grace, and be responsible for pensions? Tengzhong might have delayed the purchase and ultimately let the blame fall on the government for not giving them investment approval to buy out Hummer.

Hummer might not actually die off, it could be that a third Chinese buyer rears its head at the last minute. The Hummer H3 and the forthcoming H4 were both steps in the right direction for Hummer, the H3 being a smaller more practical version of the H2, and the H4 being a much more fuel efficient version when compared to the rest of its clan.

Apparently, there are still only 60 unsold Hummer H2’s in China, compared to the USA where a reported 2500 units remain unsold and unloved in factory parking lots. The Hummer H3 is more apparently more rare in China with only around 100 H3’s expected to be officially imported this year. However how rare, Chinese consumers will still have a chance to buy the Hummer in China at least for another year or so.

China’s official Hummer importer, Wu Zhao Automotive, has a lot of competition from gray imports of second hand Hummers which appeared in small numbers last year when the price of gasoline sky rocketed and Hummer owners fled to Ebay to rid their driveways of gas guzzling beasts at rock bottom prices. A new Hummer H3 will cost the Chinese consumer 1.28 million RMB, which is about $187,000USD, a Hummer H3 will cost around 750,000rmb or $110,000USD which only makes them affordable to the super rich in China, and as a result they can quite easily afford the fuel for them as well.
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