GM sells Hummer to Chinese group

Bloomberg

Tengzhong will assume Hummer’s dealer agreements and a senior management team, the companies said in a joint statement Tuesday. GM and Tengzhong also plan to form a long-term contract assembly and supply agreement. Hummer is worth an estimated $500 million, GM said in bankruptcy court documents.

Selling Hummer will secure more than 3,000 U.S. jobs and help GM move toward a goal of offloading four U.S. brands to exit bankruptcy as a leaner, more profitable company. The deal may also help Tengzhong grow in China’s SUV market, which surged 25 percent last year on rising affluence.

"There are a lot of new rich in China who like niche brands such as Hummer," said Ricon Xia, an analyst in Shanghai. "A lot of private firms like Tengzhong have emerged because of the economic boom and they will strike more surprising deals like this one."

Detroit-based GM has won court approval to sell assets as soon as next month after collapsing under $172.8 billion in debt and failing to adapt to consumer demands for cars that use less fuel. GM also plans to sell Saturn and Saab and wind down the Pontiac line. Sixteen potential buyers have expressed interest in Saturn, Chief Financial Officer Ray Young said Tuesday.

For Tengzhong, a privately owned maker of special-use vehicles, structural components for highways and bridges, and construction machinery, buying Hummer will add a brand with cachet it can use to expand in emerging markets, said Desmond Wong, chief executive officer of Sino Strategies Group.

"This is a good acquisition for Sichuan Tengzhong and a good sale for GM," said Wong. "They can do the manufacturing and marketing in the U.S., but they can also produce Hummer elsewhere for markets such as China, India and the Middle East."

The Hummer sale should be completed by the end of the third quarter. Credit Suisse Group is acting as financial adviser and Shearman & Sterling is serving as international legal counsel to Tengzhong. Citigroup is acting as financial adviser to GM.