Hummer brand may be bound for China, GM dealing with Tengzhong

The General Motors Co. finalized an agreement to sell its Hummer truck brand to the Chinese manufacturer Sichuan Tengzhong Heavy Industrial Machinery Co. However, before it can close, Chinese regulators must first approve the $150 million deal.

The Wall Street Journal reports that on Friday General Motors Co. finalized an agreement to sell its Hummer truck brand to Sichuan Tengzhong Heavy Industrial Machinery Co. The $150 million deal is expected to close within 30 days. However, the deal is contingent upon convincing Chinese regulators that "the brand can become profitable and that the massive SUVs fit a national strategy to improve energy efficiency" reports the WSJ. According to the WSJ, Hummer's chief executive Jim Taylor said, "One of the big issues we have is to convince them Hummer will not stay as is. That it can be a lot greener and a lot more fuel-efficient than it is." The current agreement has Tengzhong has buying 80% of Hummer and Li Yan, chairman of the Sichuan-based company Lumena Resources Corp., buying the remaining 20%. Under the agreement, General Motors will continue to manufacture the vehicles until Tengzhong takes over production no later than 2012. The sale to Chinese manufacturer Tengzhong would mark China's "first major entry into the U.S. auto market." Taylor, who plans on staying with the company after the sale, was quoted as saying:

Financial terms of the deal weren't disclosed. Tengzhong will acquire the Hummer brand, trademark and intellectual property rights needed to make the vehicles. Hummer brand dealers will continue to operate under the same contracts they had in place with GM. GM provided no financing.

In order to be more palatable for Chinese regulators, Tengzhong sees in Hummer the hope of creating a more fuel-efficient and environmentally friendly stable of trucks, including working to develop a diesel-powered Hummer for sale outside North America. The agreement between GM and Tengzhong comes on the heels of a failed deal between GM and Penske. As reported in DigitalJournal.com, GM had hoped to sell its Saturn brand to Penske but Penske's board of directors did not approve the deal. In addition, as part of its restructuring efforts, GM will phase out the Pontiac line next year and its Saab brand is also up for sale.