Tengzhong mulls new Hummer strategy
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Tengzhong could use an offshore vehicle to buy General Motor's (GM) Hummer brand if it fails to win Chinese regulatory approval for the ambitious but controversial plan that has met with cooling government appetite.
Machinery maker Sichuan Tengzhong Heavy Industrial Machinery Co, with no experience in the auto industry, had started communicating with the regulatory bodies after closing the deal with GM in October 2009.
The partners had to push back the deadline of the deal to the end of February from a previous date of Jan 31.
However, the Ministry of Commerce, which is responsible for the approval of outbound investment by Chinese companies, has repeatedly said it has not received an application from Tengzhong for approval of the purchase.
One source told Reuters earlier this month the chances of having the deal approved had dropped to 50:50, adding that the Hummer profile also works against it, as Beijing pushes for a greener economy and the global trend shifts to more environmentally friendly, low-emission cars. "Tengzhong has not given up hope yet to win government approval, but buying Hummer through an offshore investment vehicle could be an option if it can't get the green light," said a source.
Support from the government has been critical for Chinese firms that have embarked on a series of deals to pick up distressed assets from a global auto industry reeling from overcapacity and sharply depressed demand during the recession.
Beijing Automotive Industry Holding Corp (BAIC), China's fifth-ranked automaker, closed its $200 million purchase of technology platforms from GM's Saab in just two weeks.
Zhejiang Geely Holding Group's bid to buy Ford's Volvo car unit is also believed to enjoy government support.
Zhejiang Geely is the parent of Hong Kong-listed Geely Automobile Holdings Ltd.
However, technically speaking, acquiring Hummer through an offshore vehicle is also viable if the production base of the off-road sport utility vehicle remains outside China, analysts say, as new entrants need to get vehicle production licenses from the government before building plants in China.
"It seems that Tengzhong is really interested in Hummer and is trying everything it can in order to get the deal down," said Boni Sa, analyst with global industry consultancy CSM Worldwide.
