In the first ever acquisition of a US car maker by a Chinese business, privately-owned Chengdu-based road and construction equipment maker Sichuan Tengzhong Heavy Industrial Machinery Company, has acquired bankrupt auto giant General Motor's large sport utility vehicles and pickup trucks sold under the Hummer brand in a deal believed to be $500 million.(See: GM to sell Hummer; gets court nod for vehicle protection and incentive programmes).
GM filed for bankruptcy protection yesterday with debts of $172 billion and the agreement for the divestment to the Chinese firm, expected to be completed by the third quarter, also marks GM's rebuilding efforts under in Chapter 11 bankruptcy protection. According to the Telegraph of the UK, the sale also"highlights a continuing shifting in economic power from West to East."
''The Hummer brand is synonymous with adventure, freedom and exhilaration, and we plan to continue that heritage by investing in the business, allowing Hummer to innovate and grow in exciting new ways under the leadership and continuity of its current management team,'' Yang Yi, the chief executive of Tengzhong, said in a statement released by GM.
''We will be investing in the Hummer brand and its research and development capabilities, which will allow Hummer to better meet demand for new products such as more fuel efficient vehicles in the US,'' the statement said.
Sichuan Tengzhong, which has agreed to aggressively fund future Hummer product programmes, plans to expand the SUV's dealership network globally, while maintaing the main production in the US, protecting 3,000 jobs.
Troy Clarke, the president of GM North America, expressed the view that this sale would accelerate the reinvention of GM into a leaner, more focused, and more cost-competitive automaker. "Hummer will thrive globally under its new ownership," he said.
The 100-year old GM, which for over 70 years straddled the automobile industry as the world's largest auto maker, now plans to restructure by divsting its weaker brands and moving its stronger brands, Chevrolet, Cadillac, Buick, and GMC, into a leaner but stronger new company in which the US government will be the largest shareholder with a 60.8-per cent stake.
Hummer is one of four brands that GM had planned to drop. The company also plans to close or sell later this year, it popular Saturn, for which GM says 16 buyers have expressed an interest, and Saab that is said to have three potential buyers.
In 2010, GM will also eliminate another popular brand, Pontiac, while it is already in the process of selling its European division Opel to Candian-Austrian auto systems maker, Magna Steyr (See: Opel picks Magna; job cuts loom over European plants).
GM's proposeds asset sales to the new entity, through Section 363, will be heard on on 30 June in the court of New York Judge Robert Gerber, who had approved the the automaker's use of $33 billion of government funds for its operations while in Chapter 11.
The new company is likely to remain private until at least early 2010. GM is also cutting 20,000 US jobs and closing 14 plants.