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October 13, 2009

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Home » Business » Auto

Tengzhong aims to close deal by 2010

TENGZHONG, the Chinese buyer of General Motor's Hummer brand, aims to close the deal by early next year, with regulatory approval looming as the first of what will likely be multiple hurdles on the road ahead.
Sichuan Tengzhong Heavy Industrial Machinery is not just seeking the government's go ahead for a deal which runs counter to China's energy efficiency drive but will also have to turn around GM's struggling gas guzzling Hummer.
"Tengzhong could get itself into a black hole by financing the development of a greener Hummer all by itself, and it would be hard to get loans from Chinese banks. If that is the case, I don't think the government will give the green light," said John Zeng, an analyst with consulting firm IHT Global Insights.
The little-known Chinese machinery maker has been in touch with the Chinese government after signing the landmark deal to acquire the brand last week, a Tengzhong spokeswoman said yesterday.
"We have started communicating with the relevant regulatory bodies and will continue to support the application process in accordance with the requirements," she said, adding Tengzhong hoped to close the deal late this year or early next year. It first announced its intent to buy Hummer in June.
The Tengzhong spokeswoman said the company would also explore opportunities to set up a Hummer manufacturing base in China targeting the Chinese market.
Analysts said the sketchy details disclosed in the announced agreement suggest a number of potential risks down the road, including uncertainty over the prospects for regulatory approval.
"All we know is that it owns the Hummer brand and the right to use the technologies, and that by itself does not sound like a good deal as some of the existing models like H2 are gas guzzlers that are going downhill," Zeng said.
Both GM and Tengzhong chose to keep financial terms, including the Chinese firm's future investment in Hummer, to themselves.
Tengzhong's purchase agreement with GM, signed on Friday, signals the fast rise and global ambitions of the Chinese auto industry, populated by fast-growing, aggressive auto makers such as Geely Automobile and SAIC Motor Corp.


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