Hummer Deal Not Final In China

Rumors that the Hummer brand has been sold are premature as evidenced by an all important step which has yet to be made – approval from Chinese regulators who could still nix the deal.

Tengzhong Steps Forward

Though GM has announced that Sichuan Tengzhong Heavy Industrial Machinery Co. (Tengzhong) is the intended purchaser of the Hummer brand, its production facilities and related intellectual properties, the buyer still has to jump through some hurdles back home. Namely, Tengzhong needs to get the approval of Chinese regulators, which isn’t a given considering that Tengzhong has no experience running a car company.

Tengzhong expects to rely heavily on General Motors and its American operation to keep Hummer going, at least through 2012. By then, Tengzhong may be able to shift some Hummer production to China, although making a complete shift doesn’t appear likely. Tengzhong is buying 80% of Hummer, with local business baron, Li Yan purchasing the remaining shares.

Sodium Sulphate Magnate

According to The Wall Street Journal, “The 46-year-old is chairman (Li Yan) of the Sichuan-based company, which he founded and successfully listed on the Hong Kong Stock Exchange in June. Lumena is one of the world’s biggest producers of sodium sulphate, a key raw material used in detergents, glass and pharmaceutical products.

The Hummer deal comes one week after GM’s bid to sell Saturn to the Penske Auto Group collapsed. That failure means that Saturn will be phased out, probably before the year ends.

GM is also finalizing deals to sell Opel to a group led by Magna International as well as to sell Saab to a group led by Koenigsegg, a Swedish super car manufacturer. Both those deals should conclude sometime in the fourth quarter.

Once Hummer is out of the way, GM will be supporting four brands with a presence in the US market – GMC, Buick, Chevrolet and Cadillac. The company still owns Holden of Australia and GM Daewoo in Korea, plus a number of smaller operations and businesses scattered around the world.

Tengzhong Construction, Engineering

For its part, Tengzhong is recognized as one of China’s largest privately owned engineering companies. However, because China is a communist country blending in capitalistic initiatives, Tengzhong still has to complete certain procedures in its homeland before the deal is final. If all goes according to plan, then Hummer will be sold to Tengzhong at a cost of approximately $150 million.

See Also — Electric Hummer Combines the Best of Two Worlds

Will Tengzhong Build Hummer HX?

One of the more interesting concept vehicles I have previewed over the past few years was the Hummer HX, an off-road vehicle that somewhat resembles a bloated Jeep Wrangler. Previewed at the 2008 North American International Auto Show (NAIAS) in Detroit, the HX was designed by a team of three twenty-something designers led by David Rojas, suggesting a new design and engineering direction for the iconic military-esque brand.

Tengzhong’s Bid For Hummer Accepted

Yesterday, news about Hummer’s sale to Tengzhong, a Chinese heavy industrial equipment maker surfaced, a move which will inject fresh cash into parent General Motors while preserving the jobs of about three thousand factory workers and dealership employees.  With two US factories to tap, Hummer will continue to be built in the states — at least for now — and could see some new models, perhaps the HX.

The following pictures of the HX (courtesy of GM Corp.) show a model that is geared to younger drivers, with removable body panels that will allow drivers to customize their ride for whatever type of trip that they take. Imagine the HX on Daytona Beach — the roof panel comes off. Or, pounding its way through mud — wheel panels could be removed. Even the doors come off, just like on a Wrangler.

There are some things that need to be ironed out to make the Tengzhong deal a reality. Though Tengzhong is a privately owned business, the communist government must approve of the deal first.

Pushing For Smaller Cars

China has been pushing its own automakers to build smaller cars, thus Hummer flies in the face of what the central government wants. Yet, I expect that this deal will go through as it will give China an important toe-hold in the US automobile market, the first of its kind. Don’t be surprised if Tengzhong eventually merges with a Chinese car company as the communists want to consolidate the fourteen companies now operating in China down to a much smaller and easier to manage number.

The US government will need to formally approve of the Hummer deal too, but since the feds now own at least 60% of GM, that shouldn’t be a problem. President Obama has already praised the deal, thus if Congress objects they’ll have to go up against him in order to oppose the deal. That isn’t likely to happen.

GM purchased Hummer from AM General in 1998; that company will continue to make Humvee military vehicles for the US government as its operations aren’t affected by Hummer’s sale.

Is Pontiac Excitement Dead?

Word that General Motors is about to announce the complete shut down of the Pontiac brand instead of paring it back is disappointing news to say the least.  Given that GM is in precarious financial shape explains the need for a thorough review of the brand, but a complete closure seems drastic.

For the past two decades, GM has been uniting Buick, Pontiac and GMC dealerships under one roof, with a more than 80% completion rate thus far.  That move has saved the automaker money by driving traffic to dealerships who are able to offer a wider variety of products which helps to boost sales.

GM’s Third Best Selling Brand

Last year, Chevrolet sold 1.8 million passenger vehicles in the US market while Buick, GMC and Pontiac sold a combined 781,000 vehicles.  Both those numbers were down sharply over 2007, but are still quite good.  Pontiac alone sold 267,000 vehicles, the third best selling GM brand in the states.

Pontiac was founded in 1926 by GM to complement its Oakland brand.  At that time, Oakland was slotted just above Chevrolet and below Buick and Oldsmobile.  Customers easily preferred the lighter and cheaper priced Pontiacs resulting in GM shutting down Oakland in 1931.

Living In The Shadow Of Chevrolet

Over the years, the Pontiac brand has seen many changes especially as it operates within the shadow of mighty Chevrolet. However, it was back in the early 1960s when GM began to redefine the brand bringing in more performance and style in the form of the Tempest, LeMans, GTO, Grand Prix and eventually the Firebird.  Later, Pontiac rolled out the two-seater Fiero which with the Firebird maintained Pontiac’s “driving excitement” image even as the rest of the line up switched to front wheel drive.

Today, Pontiac offers mostly badge engineered products sold by other divisions with the exception of the Australian Holden G8 sport sedan. The Fiero was yanked in 1988 and the Firebird in 2002, but the rear wheel drive G8 provides solid evidence that Pontiac performance is alive at least in this one model.

Political Considerations Will Decide Pontiac’s Fate

Pontiac’s pending demise is being fueled by the Obama administration which is insisting that GM restructure the company in advance of receiving additional federal funds. GM has until June 1st to demonstrate what the company will look like going forward which includes dumping or selling off certain brands (e.g. Saab, Saturn and Hummer) while closing down plants to realign capacity with demand.

Initially, GM said that Pontiac would continue as a niche brand, selling perhaps one or two products alongside Buick and GMC. Now, GM appears interested in going forward with just four brands: Cadillac, Buick, GMC and Chevrolet while closing down or selling off everything else.

Pontiac’s fate is probably already sealed though the announcement of its pending shut down may still be days away. Regardless, Pontiac will join Oldsmobile as two of GM’s most recent brands shuttered, ending yet another chapter in the historic, if not stormy story of General Motors.

Related Reading — Pontiac G8 Lifespan Likely Cut Short