Chinese Government May Ax Hummer Deal
Tengzhong Heavy Industrial Machinery lacks the expertise to run Hummer or introduce more fuel-efficient versions of the five-ton vehicles, according to China’s National Development and Reform Commission, which is the official government entity likely to quash the deal.
None of this has been confirmed by the government yet, but in an earlier post we talked about some of the obstacles Tengzhong would face in introducing Hummer to China. Tengzhong, for its part, says the deal is on.
A PR firm representing Tengzhong points out that while the state-run radio does not like the deal, that doesn’t mean the NDRC will actually kill it.
The Wall Street Journal reports that the deal is in the ballpark of $500 million, but GM might go lower, especially now that it will shutter its plant in Louisiana, which assembles the H3. Details are scarce on the specific proposal, but Tengzhong has said it wants to keep Hummer’s headquarters, dealerships and manufacturing capacity open and operating in the U.S. The sale would have saved 3,000 jobs here.
The most likely reason for the Chinese government’s reticence is efficiency and conservation. China is adding so many new vehicles to the road so quickly that it has become a mission to emphasize fuel savings. They do so by cutting taxes on cars with smaller engines and offering incentives to companies developing hybrid and electric vehicles. Hummer, of course, is not exactly a poster child for that type of policy.