Tuesday, June 9, 2009

Chinese Government May Scuttle Tengzhong’s Hummer Bid


HUMMER’S SALE to Sichuan Tengzhong is mere months away from being finalised, however it appears there’s now one heck of a hurdle for the two companies to overcome.

A Chinese state-controlled news outlet, Shanghai Securities News, is reporting that the central government is likely to scuttle Tengzhong’s plans for the acquisition, fearing it goes against the party’s direction for the Chinese car industry.

The Chinese government is keen to consolidate its domestic car makers (presumably to help it shed the shabbier ones) into a more manageable number of manufacturers producing higher-quality products, built to global standards and emissions-friendly.

Hummer might have the former covered, but with its reputation as the manufacturer of gas-guzzling behemoths, party officials are reportedly more than a little hesitant about the purchase.

We might wonder if that is really an issue for the Chinese Government to worry about. After all, Hummer intends to keep its headquarters and manufacturing in the United States for the time being, and Tengzhong has no immediate interest in building Hummers in China.

But things work differently in China’s rigidly controlled economy. These reports do not bode well for the sale and will presumably be creating a few nervous moments in GM US.


As for the green issue, Hummer’s CEO James Taylor recently said that the brand expects to have its first alt-fuel model on the market within five years, with more to follow. The company may not be eco-friendly in its present state, but it has at least demonstrated that it intends to change its fuel-chugging ways.

But Hummer’s image is only part of the problem.

Tengzhong plans to borrow money from China’s state-owned banks to complete the purchase and won’t succeed without the approval of the central government. It may now have its work cut out reassuring the ruling party that bagging Hummer is a wise move - and one that will pay off down the track.

With the world’s motorists slowly shunning big lumbering SUVs in favour of smaller more efficient vehicles, one can perhaps understand the Chinese Government’s reluctance.