China to Block Hummer Acquisition?

The BBC is reporting that China National Radio has said that the Chinese government will reject a Chinese firm’s acquisition of the Hummer division of General Motors:

A Chinese firm’s bid to buy the gas-guzzling Hummer car brand will be blocked on environmental grounds, according to Chinese state radio.

Sichuan Tengzhong Heavy Industrial Machinery emerged as the surprise buyer for the brand earlier this year.

But China National Radio said Hummer is at odds with the country’s planning agency’s attempts to decrease pollution from Chinese manufacturers.

But Sichuan Tengzhong disputed the accuracy of the radio report.

“The fact that it is from an article from a state media organisation does not mean it is government policy,” the company said in a statement.

“Some people may have views and speculation, but the Chinese government has a process that we respect.”

The acquisition from General Motors needs Chinese regulatory approval.

CNR is quoted as saying that Sichuan Tengzhong “lacks experience in car production”.

I’ve got to admit that I found this very surprising. My take on the acquisition has been that STHIM was picking up Hummer at fire sale prices in order to acquire the dealer network and gain a foothold in the U. S. market for its own products. The Chinese company is a manufacturer of highway construction equipment and has been getting increasingly into heavy truck production in recent years. I didn’t think it was entirely a coincidence that shortly after the U. S. Congress passed a huge domestic stimulus package which included quite a bit of road and bridge building that a Chinese company that produces road and bridge building equipment would make a move that gives it a position in the American market.

In recent weeks there’s been quite a bit of speculation about the deal. See also here.

If the story proves true I suspect that it has more to do with internal Chinese politics than it does with the rationality of the acquisition or environmental considerations. And if the deal flops, it wouldn’t be particularly good news for GM which is trying to shed brands and maybe pick up a little cash.

FILED UNDER: General, ,
Dave Schuler
About Dave Schuler
Over the years Dave Schuler has worked as a martial arts instructor, a handyman, a musician, a cook, and a translator. He's owned his own company for the last thirty years and has a post-graduate degree in his field. He comes from a family of politicians, teachers, and vaudeville entertainers. All-in-all a pretty good preparation for blogging. He has contributed to OTB since November 2006 but mostly writes at his own blog, The Glittering Eye, which he started in March 2004.

Comments

  1. The sale of Hummer to any country is foolish and dangerous. Instead of trying to sell America to the world one piece at a time and thus making America weaker in a national security issue, I suggest that the American public be invited to purchase stock in the company at $1.00 a share. With the number of shares in the initial sale to be limited to one thousand per person. Instead of allowing big companies to purchase early the American public would have one month to decide if they want to invest, after that the shares would be open to all, only in the USA.
    If the MiddleAmerican has to pay back the billions already spent they might as well have a chance at a little profit on this deal!

  2. We’re running out of “greater fools.”

  3. Eric Florack says:

    If nothing else, the Chinese buyout of Hummer could be considered a life preserver to general motors. And by extension, the united states economy. Question; Can China have reached a point in their history where a strong U.S. economy is no longer in their interests? If so, perhaps we have a reason for that life preserver being pulled back.

  4. William d'Inger says:

    Sounds like a bargaining ploy to me. Make scary noises to rattle GM into making a panic decision to lower the sale price even further. I would advise GM to raise the price 5% every time China does that until China grudgingly coughs up the deal.

  5. PD Shaw says:

    Given that Fiat was willing to pay zero dollars to acquire Chrysler as a distribution network, the value of Hummer for the same purpose has to be close to a negative number.