[Marxism] Perfect match between buyer and product

[Louis Proyect]

NY Times, June 3, 2009
Chinese Company Said to Be Buyer of Hummer
By KEITH BRADSHER and NICK BUNKLEY

GUANGZHOU, China — General Motors has reached a preliminary agreement 
for the sale of its Hummer brand of large sport utility vehicles and 
pickup trucks to a machinery company in western China with ambitions to 
become a carmaker, a person familiar with the Chinese government 
approval process said Tuesday.

The Sichuan Tengzhong Heavy Industrial Machinery Company Ltd., based in 
Chengdu, concluded the agreement with G.M., said the person, who 
insisted on anonymity.

Sichuan Tengzhong is a privately owned company, but Tuesday’s deal 
required preliminary vetting by Beijing officials, who retain the right 
to veto any effort at an overseas acquisition by a Chinese company and 
who give special attention to deals over $100 million.

G.M. announced the deal early Tuesday morning in Detroit but said that 
the memorandum of understanding would not allow it to reveal the buyer 
or the price. Industry analysts have estimated that the Hummer division 
would sell for less than $500 million.

G.M., in a blog posting, said it had seen the report regarding a Hummer 
buyer but could not comment on speculation.

Sichuan Tengzhong is known in China for making a wide range of road 
equipment, from bridge piers to highway construction and maintenance 
machinery. But even before the Hummer deal, the company has been moving 
more into heavy-duty trucks, including tow trucks and oil tankers.

Sichuan Tengzhong’s offices were closed on Tuesday evening and calls to 
its headquarters were not answered.

Ray Young, G.M.’s chief financial officer, said Tuesday that the 
prospective Hummer buyer had asked G.M. not to disclose their identity 
until the deal was concluded. “It was their preference, and we respected 
that preference,” Mr. Young told analysts and reporters on a conference 
call.

G.M. said the deal would save about 3,000 jobs in the United States, 
including those at its 153 domestic dealerships, and that Hummer would 
remain based in the United States.

“Over all, we’re pretty pleased,” said a spokesman for Hummer, Nick 
Richards, without identifying the buyer. “If you think about the 
qualities we’d want in a new owner for the brand, this buyer really met 
all the criteria. They’ve got a proven track record in international 
business, and they’ve got a long-term vision for the brand. They’ve got 
the capital to invest in more efficient vehicles, which is what’s 
necessary to grow the brand.”

If the purchase is completed, it would mark the first acquisition of a 
well-known American automotive brand by a Chinese company, after many 
months of speculation about when this might occur. Chinese automakers 
have already purchased the MG and Rover brands, two of the most famous 
names in British automotive history.

As a Chinese company, Sichuan Tengzhong could face a challenge in 
presenting the deal to American owners of Hummer. 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.

It was Gov. Arnold Schwarzenegger of California who persuaded the 
longtime maker of Humvees, A. M. General in Mishawaka, Ind., to build a 
civilian version. As he recounted at a Hummer news conference in 2001, 
Mr. Schwarzenegger was filming the movie “Kindergarten Kop” in Oregon in 
1990 when he saw a convoy of 50 Humvees drive by and decided that he had 
to have a civilian model of the same vehicle, which became the Hummer H1.

G.M. bought the rights to the Hummer brand in 1999 and began making 
somewhat smaller Hummers. G.M. initially procured the H1 from A.M. 
General but discontinued the model in 2006.

Under the preliminary agreement announced on Tuesday, GM will initially 
continue to manufacture Hummers under contract for Sichuan Tengzhong, 
which will then market them around the world. G.M. will continue making 
the H3 and H3T models in Shreveport, La., through the end of next year, 
for example.

The buyer plans to shift additional production of the H3 from a plant in 
South Africa to Shreveport, Mr. Richards said.

Sichuan Tengzhong could bring Hummers to the crowded streets of China’s 
big cities, although the vehicles would face the 40 percent tax that 
China imposes on cars, S.U.V.s and minivans with engines over 4 liters.

G.M. has not set up its own Hummer dealer network in China, but 
entrepreneurs already import the vehicles and sell them in the biggest 
cities.

Copies of the Hummer by Chinese automakers draw crowds at auto shows, 
although they are labeled as concept vehicles and are not for sale.

G.M., which is hoping to shed unwanted assets and emerge from bankruptcy 
in about two months, said it expected the deal to close in the third 
quarter. The automaker had planned to close Hummer if a buyer could not 
be found. It is also trying to sell Saturn and Saab this year and plans 
to eliminate a fourth brand, Pontiac, in 2010.

G.M., with 60 percent government ownership, will keep Chevrolet, 
Cadillac, Buick and GMC.

“Hummer is a strong brand,” Troy Clarke, the president of G.M. North 
America, said in a statement. “I’m confident that Hummer will thrive 
globally under its new ownership. And for G.M., this sale continues to 
accelerate the reinvention of G.M. into a leaner, more focused, and more 
cost-competitive automaker.”

Once considered the ultimate muscle car, the Hummer became a symbol of 
what was wrong with G.M. and the American auto industry — big, bulky and 
gas-guzzling. Sales of Hummers fell 51 percent last year, the worst drop 
in the industry, and are down 67 percent so far in 2009.

Mr. Richards said the buyer planned to continue selling Hummer’s current 
lineup as it develops “more efficient” vehicles. The brand would 
eventually sell trucks fueled by diesel, ethanol and other alternative 
fuels, he said.

In February, G.M. said it had three bidders for Hummer, which has about 
220 dealers globally.

Hummer’s chief executive, James Taylor, said the sale would allow the 
company to continue to grow and maximize the brand’s potential.

In the telephone conference call, Mr. Young said G.M. had been 
approached by 16 parties who were interested in bidding on its Saturn 
division. The group includes financial investors and companies that are 
interested in distributing Saturn vehicles.

He said G.M. had not set a date when it would winnow down the group to a 
handful of finalists, or when it hoped to announce a sale. One 
complication is devising the right operating plan for an independent 
Saturn, he said.

G.M. said it would work with the bidders to come up with the right idea. 
He said G.M. was using advisers and that prospective bidders also had 
retained advisors, but would not be more specific.

Keith Bradsher reported from Guangzhou, China, and Nick Bunkley reported 
from Detroit. Micheline Maynard contributed reporting from New York.