The—mind you, tentative—agreement of Government Motors to sell Hummer to China’s Sichuan Tengzhong Heavy Industrial Machinery has people worried. No, it’s not the Americans who are scared of military secrets escaping to China. “The deal has observers in China worried,” writes Forbes. And worried they should be. The deal as it is makes little sense for a Chinese manufacturer. Especially for a manufacturer that has never built passenger cars. Tengzhong makes heavy industry vehicles, highway and bridge components, construction machinery and energy equipment.
What worries the Chinese is exactly what made GM so happy: According to the Memorandum of Understanding, Tengzhong will keep Hummer’s core management and operations team and existing dealership network. Reuters reports GM saying that “the buyer of Hummer would contract to build the H3 model SUV and the H3T pickup truck at GM’s plant in Shreveport, Louisiana — through at least 2010.” Why, oh my?
Contract manufacture in Louisiana makes some sense. The contract won’t be signed and sealed before the third quarter of 2009, or later. It will take a while before a maker of bridge pontoons gears up for production in China. But why keep the dealers in the USA if they could be easily thrown to the wolves by the name of C11?
“It will be difficult for Chinese to develop this well,” Forbes quotes Liu Sheng Wang, Shenzhen-based analyst for China Merchant Securities. Bigger Chinese companies have failed abroad. “There have been no successful cases in the past” of such acquisitions says Liu. SAIC’s adventure with South Korea SUV maker Ssangyong Motor ended in a costly “defeat,” he said. Ssangyong filed for bankruptcy in February.
Li Chunbo, Beijing-based analyst for CITIC Securities, is likewise scratching his head: “If the cars are built in the US and sold to China, that will be good for American employees, but the Hummer won’t successfully enter the Chinese market.” Hummers ain’t cheap, and China levies a 40 percent tax on big bore imports.
And selling a Hummer owned by the Chinese to the few remaining hardcore Hummer adherents? “As a Chinese company, Tengzhong could face a challenge in presenting the deal to American Hummer owners,” muses the New York Times. “The brand has long sought to emphasize patriotism, stressing that the Hummer H1 was essentially the same vehicle built in the same factory as the Humvee that carries American soldiers into battle in Iraq and elsewhere.”
The always highly patriotic UAW doesn’t share the NYT‘s qualms: “We’re just excited that Hummer may live on,” said Morgan Johnson, president of UAW Local 2166, which represents workers at the GM plant.
A cheaper, non-imported, Hummer could work in China. The “Chinese are not as environmentally conscious as American consumers, so Hummer does not face the same consumer backlash,” said Shaun Rein, head of China Market Research Group. A cheaper, Hummer-badged SUV could also be an export hit to other world markets that don’t apply the same stigma.
There is not much know-how changing hands. The Chinese are perfectly capable of building Hummer-inspired trucks themselves. The only thing of value would be the Hummer brand and the fact that the trucks have received regulatory approval in world markets.
GM said Tengzhong will also enter into a long-term contract assembly and key component and material supply agreement with GM. Sounds great to the casual observer. Parse the sentence carefully. According to Forbes, Tengzhong “will also clinch a long-term agreement to become a GM supplier.” Could it be that Tengzhong took Hummer off Government Motors’ hands in return for a nice parts—and possibly contract manufacture—deal?
But then why keep the Hummer dealers in the US around? Did anybody explain the US dealer franchise laws to Tengzhong? Here’s guessing that someone will before the contracts are signed.
So GM will become a supplier of Hummers to the new owners. What happens when gas prices go back up and sales tank even more? GM will be stuck supplying an unwanted product, stuck with an underutilitzed plant, stuck with the union workers in it. Oh, wait…
Can’t wait for the new BUMMER.
That’s quite the crash picture. I’ve never seen aluminum foil crush like that.
It must be a kindergartner’s “Terminator Lunch Box” under the rear-most seat maintained the survival-space in the bus.
By the way, I went to the website the picture came from, and it tried to put a Trojan Horse virus on my computer.
So if I understand correctly, Hummers will be built in LA with Chinese parts? That sounds terrific. Perhaps Wals-mart can start selling them at the Tire and Lube Express.
I think at the junction they are pleased that *ANYONE* would buy these toxic assets.
Let’s hash out all these minor details later…
I think GM is setting up more than a few deals with China at this point and as the months roll by we will see the American people paid 100 billion dollars to finance the largest outsourcing in history.
Dumping Hummer at any expense makes sense. What’s the alternative, shutting it down completely? I believe that makes more financial sense than continuing to maufacture such an ill-conceived vehicle. The fact that they get a year and a half contract to continue making this white elephant at someone else’s expense sounds like a deal.
Perhaps the Sichuan Tengzhong Heavy Industrial Machinery envisions moving the assembly to China and becoming a defense contractor. As long as it’s out of GM’s hair it’s the right thing to do.
As have been stated elsewhere in this thread, the H2 and H3 are the same as the Suburban and the SUV platform. I don’t hear the call to GM to end those lines. The Hummer is no more ill conceived than those vehicles. Obviously there is a market for them.
The question remains; is there ENOUGH of a market for them? Personally, I think it was a bad idea to maintain multiple vehicles in the same catagory (GM brands competing against each other such as the H2/Surburban or the Sky/Solstice). It remains to be seen if those vehicles can “take off” once they are released from the GM yoke.
IF (and that’s a big if) Hummer scales down production, remains built in America, by Americans, and maintains (improves) quality – I don’t see why it wouldn’t succeed. Just like Toyota and Honda, American’s will not care where the parent sends the profits as long as it satisfies thier needs, one being patriotism and supporting the American worker – UAW or not.
Keeping the dealers makes some sense as well. Hummer dealers have large investments in their dealerships (special displays, 4×4 demonstration tracks, etc) some of which could have been required (thus incure some return from GM). With those in place, CHummer would be in better position to succeed and GM would be spared the lawsuits.
However, as stated elsewhere in this thread, Hummer will remain a niche brand. To make a go of it, they will probably also rely on “other” contracts with GM.
1. 2010 will come quickly.
2. The new owners will learn much from observing the manufacturing process in Louisiana.
3. The knowledge can be exported to China …
4. With the tooling…
5. Think of the cost savings by not having to pay insurance on a factory in Hurricane Alley.
We don’t know how much Tengzhong paid for the Hummer brand, and they’re not exactly a household name to begin with. So for a no-name company to buy a recognizable brand, there’s an added value. It makes them look bigger than they were last week.
Good for Tengzhong, and too bad for all the dealers and workers in the U.S. who erroneously think their bacon has been saved. In reality, their bacon will become Sichuan-styled pork fried rice.
Yesterday, TTAC posted a pic of a Corolla sitting on a circa 2000 Honda Civic, a car which many would consider a deathtrap. Today, we have a picture of one of those Hummers which people buy in order to “feel safe.”
I located a site with additional photos of the Corolla-Civic “marriage” and the Honda’s hood is banged up and it strikes me as probable that the Honda’s windshield is broken. However, the picture TTAC selected clearly shows that the driver’s side window glass is unbroken and there’s no deformation in the vehicle obvious around the doorframe.
On the other hand, this Hummer looks like the driver took quite a shot to the face. This is one of those fullsize Hummers, isn’t it? The truck thing that’s an H2 with the back sawn off?
Maybe this whole idea of “I need a big vehicle to be safe,” is a little overrated?
Maybe people who intend to put their faith in big vehicles, “to be safe,” should be buying school busses. It looks like the damage to the school bus can be repaired in tenty minutes with a big-ass mallet and some yellow and black spray paint.
The structural integrity of the school bus is impressive. (Notice how the Hummer’s right front wheel is folded up underneath it.) I wonder what kind of crash testing is performed on school bus designs?
KixStart: Yes, the obvious answer is to drive around in a school bus! Look for this to be a future trend among soccer Moms when the economy recovers.
I don’t think the soccer moms and sugar daddies buying Hummers are buying them for their patriotic rep, but because they’re the biggest thing on the road. They won’t care.
Maybe this whole idea of “I need a big vehicle to be safe,” is a little overrated?
It’s overrated by some but underrated and inaccurately discounted by others. A larger car of the same time is safer, all things being equal, but a taller car suffers more from rollover. Trucks are particularly dangerous, but there may be other factors there. The Insurance Institute for Highway Safety publishes all their figures.
Sichuan Tengzhong’s “Light Military Vehicle” contract bid to the Chinese Army would be threatened by that photo.
Hummer management: ” So Tengzhong, you’re the new boss, huh?”
Tengzhong: ” Yes we are…what we would like you to do first is…”
Hummer mgt: ” yeah, Tengzhong, thanks for the money, that’s all nice and all…but we have work to do here so why don’t you just go away now and keep sending us money so we can keep working, OK?!?!? that would be swell…Thanks!!”
Each time I read about this deal between GM and Sichuan Tengzhong, I keep imagining this scenario in my head…I’d be willing to bet that in the case of Opel and Hummer both, lot’s and lot’s of product planning is humming through data lines straight into the GM Tech Center and immediately after the transfer, the new owners suddenly find themselves with not much in the cupboard of CAD files.
Does the deal include the H1 and any IP for the original Humvee ? I could see some industrial conglomerate wanting the H1 to shore up military deals and contracts, the H2/H3 models would then whither on the vine. As for honoring contracts with dealers and the UAW, forget it; the Chinese will simply walk away and the govt will say that in the spirit of international cooperation there will be no trade retribution towards the Most Valued Nation.
From an Automotive News [sub] interview with Hummer CEO Jim Taylor:
“The immediate challenge is to regain our sales momentum,” Taylor said. “Then we have to go after some product changes that will get us into that space where we are compliant with new federal regulations.”
That will mean some model and powertrain changes, said Taylor, who added that nothing specific has been decided yet.
“You’ll see a broader lineup, that means more models and alternative powertrains that meet the federal regulations,” he said.
The new Hummer will have to set up its own engineering shop and provide the marketing for the products worldwide, Taylor said. Where those will be located remain to be determined, but he says it will be inside the United States.
Does the deal include the H1 and any IP for the original Humvee ? I could see some industrial conglomerate wanting the H1 to shore up military deals and contracts, the H2/H3 models would then whither on the vine.
Two companies in china have already produced close clones of h1 from civilian models and parts.
This isn’t as terrible of the deal as forecast here. GM gets money, and Tengzhong get a brand (which is popular in china) and supporting factory/machines.
It’s better than throwing Hummer away, at least in this case H owners get factory support and better residual.
By the way, I went to the website the picture came from, and it tried to put a Trojan Horse virus on my computer.
Of course it did, it’s a Russian website. You should never go to ANY website with .ru on the end of it.