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Bullish on Hummer business

SICHUAN Tengzhong Heavy Industrial Machinery Co, which has entered into a memorandum of understanding to acquire General Motor Corp's Hummer brand, said it will invest in the development of new Hummer products and did not exclude the possibility of building plants in China.

"As the Hummer business grows globally, including in China, additional capacity on the ground in China may make sense," the company said in a statement yesterday.

Chengdu-based Tengzhong said it will provide capital and resources to develop next generation models and has the capability to produce new fuel efficient models.

"We can unlock the potential (to increase profitability and market share of the new Hummer) by providing investment to develop new products," said Yang Yi, CEO of Tengzhong. "We also plan to expand the brand's reach to new international markets, particularly markets such as China in which we have considerable local expertise."

The National Business Daily reported yesterday that Tengzhong outlined a plan in the acquisition proposal to invest US$450 million in a Hummer production line in Chengdu in Sichuan Province. But the result is pending further discussion.

Tengzhong and GM signed the MOU on Tuesday, under which GM will make vehicles, including the H2 and H3 models, for Hummer in the United States but long-term contracts for assembly, key components and material supply need to be further discussed.

However, rising oil prices have added pressure on Hummer sales. Hummer's US deliveries fell 67 percent this year through April from a year ago after tumbling 51 percent in 2008, according to Autodate Corp. Hummer's H1, which has an engine capacity of 6.5 liters, never sold more than 875 units a year and halted production in 2006.

Vehicle output in China needs state approval and analysts questioned whether a Hummer plant can gain government support amid energy saving and pollution cutting moves.


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