HummerMann
06-06-2009, 01:29 PM
This story was also being reported on CNBC yesterday.......so maybe there's still hope for Perleman at AMGeneral who was rumored in the hunt for Hummer GM?s Hummer Sale May Fail to Clear China?s Regulatory Hurdles
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By Bloomberg News
June 5 (Bloomberg) -- General Motors Corp., seeking to shed unprofitable units after filing for bankruptcy, may have its agreement to sell the Hummer sport-utility vehicle brand blocked by Chinese regulators, threatening 3,000 U.S. jobs.
Sichuan Tengzhong Heavy Industrial Machinery Co.?s bid for Hummer runs counter to China?s attempts to develop a globally competitive auto industry by focusing on fuel-efficient vehicles, according to analysts. The government also wants to pare the nation?s more than 100 automakers to ease competition.
?A new entrant in the car industry is not something they?re looking to see,? said Chip Chaikin, who helps oversee $800 million as managing director of Shanghai-based Blue Point Capital Partners Asia. ?It?s pretty unlikely? the deal will go through.
Tengzhong also needs to persuade at least two Chinese government agencies that it can turn Hummer into a profitable company to get clearance for the deal, said Zhang Xin, an analyst with Guotai Junan Securities in Beijing. Hummer?s U.S. sales are plunging as higher gasoline prices and rising job concerns hammer demand for its gas-guzzling SUVs.
Approval Unlikely
China is unlikely to approve the Hummer deal, state-owned Shanghai Securities News reported yesterday, without saying where it got the information. The government is encouraging companies to buy overseas partsmakers rather than automakers, added the newspaper, which is affiliated with state-controlled Xinhua News Agency.
?There are many uncertainties about the deal and one of them is whether Chinese authorities will approve it,? said Zhang. ?The big issue for Tengzhong is how long it will take to make a profit from the investment.?
Hummer is worth an estimated $500 million, Detroit-based GM has said in bankruptcy documents. The brand is one of four in the U.S. the carmaker wants to offload to exit bankruptcy as a leaner, more profitable company.
GM Chief Financial Officer Ray Young said yesterday that he doesn?t expect regulators to block the deal and that Tengzhong is ?very excited? about it.
?Some people may have views and speculation but the Chinese government has a process that we respect,? said Tim Payne, a spokesman for Chengdu, Sichuan province-based Tengzhong. ?We have only just signed an MOU but as we develop our proposals with GM and Hummer we will continue to work with the appropriate authorities.?
?It is a business decision,? said Chen Rongkai, a media officer at China?s Ministry of Commerce. He declined to comment further.
Commerce Ministry
The commerce ministry vets all overseas investments worth more than $100 million. Smaller deals go through local regulators. The State Administration of Foreign Exchange also looks at all overseas investments by Chinese companies.
GM has won court approval to sell assets as soon as next month after collapsing under $172.8 billion in debt and failing to adapt to consumer demands for cars that use less fuel. Sales of Hummer SUVs, which start at about $31,000 for the H3, fell 51 percent in 2008 and 67 percent this year through April.
GM and Tengzhong, a privately owned maker of special-use vehicles and construction machinery, expect to complete the purchase in the third quarter, pending closing conditions and regulatory approvals, they said in a June 2 statement. AM General Corp. builds Hummer H2s in Indiana for GM. The H3 is built in Shreveport, Louisiana.
SAIC?s Experience
Chinese carmakers haven?t benefited from previous overseas acquisitions. SAIC Motor Corp., China?s biggest domestic automaker, bought control of South Korea?s Ssangyong Motor Co., only to have the unit go into receivership after SUV sales plunged.
Credit Suisse Group AG is acting as financial adviser to Tengzhong on the Hummer deal and Shearman & Sterling is serving as international legal counsel. Citigroup Inc. is acting as financial adviser to Detroit-based GM.
The deal may also stumble if Tengzhong needs to raise funds from Chinese lenders, who have been told by their regulator to enhance risk management.
?The government will step in if Tengzhong wants to fund the deal with loans from domestic banks,? said Yale Zhang, a director at CSM Asia in Shanghai.
Public Offer
Still, the fact that Tengzhong has publicly made an offer may suggest that it can complete it, said Ricon Xia, a Daiwa Institute of Research (H.K.) Ltd. analyst in Shanghai.
?The way the deal has played out so far shows that Tengzhong is no novice in capital markets,? said Xia. ?They may be able to pull it off.?
That would mean overcoming the central government?s push to curb competition in the auto industry, including combining the nation?s 14 largest automakers into 10 by 2011. The move is designed to boost profit margins and help form bigger players able to challenge Toyota Motor Corp. and Volkswagen AG worldwide. Tengzhong doesn?t make SUVs or passenger cars.
China is also encouraging automakers to build more fuel- efficient cars, including hybrids, to help win sales overseas and to reduce oil imports and pollution at home. The 3.7-liter Hummer H3T gets 14 miles to the gallon in city driving, according to the U.S. Environmental Protection Agency.
?If I were a betting man, I?d bet this wouldn?t going to happen,? said Chaikin. Still, ?crazier things have occurred.?
Share | Email | Print | A A A
By Bloomberg News
June 5 (Bloomberg) -- General Motors Corp., seeking to shed unprofitable units after filing for bankruptcy, may have its agreement to sell the Hummer sport-utility vehicle brand blocked by Chinese regulators, threatening 3,000 U.S. jobs.
Sichuan Tengzhong Heavy Industrial Machinery Co.?s bid for Hummer runs counter to China?s attempts to develop a globally competitive auto industry by focusing on fuel-efficient vehicles, according to analysts. The government also wants to pare the nation?s more than 100 automakers to ease competition.
?A new entrant in the car industry is not something they?re looking to see,? said Chip Chaikin, who helps oversee $800 million as managing director of Shanghai-based Blue Point Capital Partners Asia. ?It?s pretty unlikely? the deal will go through.
Tengzhong also needs to persuade at least two Chinese government agencies that it can turn Hummer into a profitable company to get clearance for the deal, said Zhang Xin, an analyst with Guotai Junan Securities in Beijing. Hummer?s U.S. sales are plunging as higher gasoline prices and rising job concerns hammer demand for its gas-guzzling SUVs.
Approval Unlikely
China is unlikely to approve the Hummer deal, state-owned Shanghai Securities News reported yesterday, without saying where it got the information. The government is encouraging companies to buy overseas partsmakers rather than automakers, added the newspaper, which is affiliated with state-controlled Xinhua News Agency.
?There are many uncertainties about the deal and one of them is whether Chinese authorities will approve it,? said Zhang. ?The big issue for Tengzhong is how long it will take to make a profit from the investment.?
Hummer is worth an estimated $500 million, Detroit-based GM has said in bankruptcy documents. The brand is one of four in the U.S. the carmaker wants to offload to exit bankruptcy as a leaner, more profitable company.
GM Chief Financial Officer Ray Young said yesterday that he doesn?t expect regulators to block the deal and that Tengzhong is ?very excited? about it.
?Some people may have views and speculation but the Chinese government has a process that we respect,? said Tim Payne, a spokesman for Chengdu, Sichuan province-based Tengzhong. ?We have only just signed an MOU but as we develop our proposals with GM and Hummer we will continue to work with the appropriate authorities.?
?It is a business decision,? said Chen Rongkai, a media officer at China?s Ministry of Commerce. He declined to comment further.
Commerce Ministry
The commerce ministry vets all overseas investments worth more than $100 million. Smaller deals go through local regulators. The State Administration of Foreign Exchange also looks at all overseas investments by Chinese companies.
GM has won court approval to sell assets as soon as next month after collapsing under $172.8 billion in debt and failing to adapt to consumer demands for cars that use less fuel. Sales of Hummer SUVs, which start at about $31,000 for the H3, fell 51 percent in 2008 and 67 percent this year through April.
GM and Tengzhong, a privately owned maker of special-use vehicles and construction machinery, expect to complete the purchase in the third quarter, pending closing conditions and regulatory approvals, they said in a June 2 statement. AM General Corp. builds Hummer H2s in Indiana for GM. The H3 is built in Shreveport, Louisiana.
SAIC?s Experience
Chinese carmakers haven?t benefited from previous overseas acquisitions. SAIC Motor Corp., China?s biggest domestic automaker, bought control of South Korea?s Ssangyong Motor Co., only to have the unit go into receivership after SUV sales plunged.
Credit Suisse Group AG is acting as financial adviser to Tengzhong on the Hummer deal and Shearman & Sterling is serving as international legal counsel. Citigroup Inc. is acting as financial adviser to Detroit-based GM.
The deal may also stumble if Tengzhong needs to raise funds from Chinese lenders, who have been told by their regulator to enhance risk management.
?The government will step in if Tengzhong wants to fund the deal with loans from domestic banks,? said Yale Zhang, a director at CSM Asia in Shanghai.
Public Offer
Still, the fact that Tengzhong has publicly made an offer may suggest that it can complete it, said Ricon Xia, a Daiwa Institute of Research (H.K.) Ltd. analyst in Shanghai.
?The way the deal has played out so far shows that Tengzhong is no novice in capital markets,? said Xia. ?They may be able to pull it off.?
That would mean overcoming the central government?s push to curb competition in the auto industry, including combining the nation?s 14 largest automakers into 10 by 2011. The move is designed to boost profit margins and help form bigger players able to challenge Toyota Motor Corp. and Volkswagen AG worldwide. Tengzhong doesn?t make SUVs or passenger cars.
China is also encouraging automakers to build more fuel- efficient cars, including hybrids, to help win sales overseas and to reduce oil imports and pollution at home. The 3.7-liter Hummer H3T gets 14 miles to the gallon in city driving, according to the U.S. Environmental Protection Agency.
?If I were a betting man, I?d bet this wouldn?t going to happen,? said Chaikin. Still, ?crazier things have occurred.?