The sale of Hummer to Sichuan Tengzhong Heavy may run afoul of the government, Bloomberg reports. The Chinese government. After Hummer hit the wires on Tuesday, there were increasing rumors in Beijing that China’s central government is not particularly thrilled. The acquisition runs contrary to two of China’s declared goals.
Yi, China wants fuel efficient vehicles and not hydrocarbon hungry Hummers.
Er, China wants to desperately consolidate its more than 100 (nobody is really sure) automakers to a manageable number. The goal is to merge China’s 14 largest automakers into 10 by 2011, and let the others fade away. A new entry, and one that is supposedly owned by a mining baron is all they need.
Reports appeared in the financial magazine Caijing and state-run newspapers. They say a mining tycoon, Suolang Duoji, who is also known by the Chinese name Li Yan, was behind the deal. Suolang Duoji owns a big stake in Sichuan Tengzhong. He also is the controlling shareholder and chairman of Lumena Resources Corp., a mining company and the world’s second largest producer of mirabilite, a chemical used in washing powder and pharmaceuticals.
“A new entrant in the car industry is not something they’re looking to see,” said Chip Chaikin, who helps oversee $800 million as managing director of Shanghai-based Blue Point Capital Partners Asia. “It’s pretty unlikely” the deal will get approved.
If the purchase is more than $100 million, the deal needs to be approved by the central government. If it is below $100 million, a permit from the provincial government is required. Sichuan province probably will look more kindly at the deal than Beijing. This may explain the $80 million Hummer is supposedly worth. But then, the State Administration of Foreign Exchange also looks at all overseas investments by Chinese companies.
State-owned Shanghai Securities News says outright that China is unlikely to approve the Hummer deal. The government is encouraging companies to buy overseas parts makers rather than automakers, says the paper. Shanghai Securities News belongs to the state-controlled Xinhua News Agency. They usually don’t write these things unless there was a nod from above.
There is another way the deal can be blocked. If Tengzhong needs to raise funds from Chinese lenders, their regulator may tell them that it’s too risky. “The government will step in if Tengzhong wants to fund the deal with loans from domestic banks,” said Yale Zhang, a director at CSM Asia in Shanghai.
Few people in the US realize just how closely involved the Chinese government is with businesses there. The US involvement in GM, AIG, etc. is small potatoes compared to how it is done in China. Food for thought for those who wail that China is now a more capitalist country than the US.
Put those unloved Hummer puppies to sleep already…
I would much rather see HUMMER go away than to be sold off to the Chinese. Heck, they already (the Chinese, that is) practically own the United States. With $700B plus in debt owed to them, they are in a prime position to really reek havoc on our economy if they so chose to do so. I’d rather have seen us spend the money we spent on Gulf War II go to paying the Chinese off, as I feel our debtload is a much greater security risk than Iraq ever was (and for the record, I am closely tied to the military, would go to the ends of the earth for our troops, but still think Iraq wasn’t worth it).
I’m glad to see that Saturn will stay here in America with Penske buying it. Now I wonder just what ol’ Roger will do with the tarnished nameplate…
Who cares? Hummer needs to just go to sleep and never wake up again. I feel bad for the dealers that were forced to build new buildings, but they’d be better off using them for nice used car facilities anyhow. Goodbye Hummer, and good riddance.
It’s got nothing to do with making SUVs. It’s about brand recognition. Visualize the word “HUMMER” on the side of a cement mixer, instead of “Sichuan Tengzhong Heavy Industries” and it becomes very clear that they bought a brand, and somebody threw in a factory, a dealer network, and an unwanted product line.
Think about it. How much did Home Depot invest to come up with a brand for their house-brand hand tools so they could compete with Sears Craftsman?
Good for you Sichuan Tengzhong Heavy Industries.
Rod Panhard :
It’s got nothing to do with making SUVs. It’s about brand recognition. Visualize the word “HUMMER” on the side of a cement mixer,
I would prefer to see the “AutoCar” brand resurrected that I see “HUMMER” – on anything. Nor do I see the HUMMER brand name successfully applied to cement mixers or any construction equipment for that matter. Too much baggage.
Nor do I see the HUMMER dealer network being able to transition to heavy equipment sales, which are perhaps worse than the HUMMER sales are, currently.
Think about it. How much did Home Depot invest to come up with a brand for their house-brand hand tools so they could compete with Sears Craftsman?
Errr, don’t you mean Lowe’s and Kobalt tools? If, indeed, HD has its own brand of tools, they clearly failed to get me to recognize that they have done so!
Bruce
The more Hummer hate I see the more I want one. Better yet, the more Hummer hate there is the easier it’ll be for me to buy a used one. Just need to decide on which greenie-offensive bumper sticker to place on it.
@ reclusive_in_nature : I’m not so much a Hummer hater, just someone that thinks GM miffed it, big time.
GM designed and built Hummers to be great off-road vehicles, which they are for the most part. The problem is that most of the people that bought them never had the slightest intent to take them off road. Hummers are heavy, expensive, and in everyday life are generally hard to live with. They should have taken a page from Jeep’s playbook and offered “regular” RWD models for poseurs that wanted the look, and “Alpha” models with all of the off-road kit for the hardcore guys. They should have been quicker to market with more new products. They should have been more mindful of fuel economy. In my opinion, GM didn’t think Hummer all the way through, they just threw products out there, and it has put them in a bad spot. Hummer would be way better off had GM compromised just a little with their off-road B/S and sold Hummer as an image, which is ultimately all Hummer’s good for any more regardless. Only now Hummer’s image is that of the H2, an expensive, useless gas guzzler that douchebags drive.
WHAT?
A central government running the automotive industry?
Telling corporations what to do and who to merge with and what to build and controlling every aspect of it????
What kind of communist totalitarian un-american know-it-all pigheaded stuck-up government ruled by a dictatorship would do something like that?
Telling corporations what to do and who to merge with and what to build and controlling every aspect of it???? What kind of communist totalitarian un-american know-it-all pigheaded stuck-up government ruled by a dictatorship would do something like that?
I don’t know. Which one? Because “controlling every aspect of it” certainly doesn’t apply to the United States.
Interesting! Seems like it’d be the opposite.
threeer : I wouldn’t worry too much about the Chinese attempting to wreck the US economy. A decent portion of their economy is dependent on exports to the US and the US Dollar makes up a significant portion of the basket of currencies the Renminbi is pegged to.
Areitu:
The RMB is currently completely pegged to the USD. Hasn’t much drifted from 6.83 against the dollar since summer last year.
Which lowers the price of the RMB against other world currencies as the USD goes down.