AP Source: GM nearing completion of Hummer sale
DETROIT — General Motors Co. is poised to sign a deal to sell its Hummer brand to a Chinese heavy equipment manufacturer as early as Thursday afternoon, a person briefed on the deal said.
Representatives of Sichuan Tengzhong Heavy Industrial Machinery Corp. have been in the U.S. for the past nine days working on final details with GM, and both sides hope to sign a definitive sales agreement on Thursday or Friday, said the person, who asked not to be identified because the deal is not final.
The purchase price was not known, but GM said in its bankruptcy filing that Hummer might bring $500 million or more.
Hummer, whose smallest model gets 16 miles per gallon in combined city and highway driving, sold well until the middle part of this decade when fuel prices began to rise. Through September, GM has sold only 8,193 Hummers in the U.S. this year, down 64 percent from the same period last year. In September, only 426 Hummers were sold nationwide, according to Autodata Corp.
GM, which spent 40 days in bankruptcy protection during the summer and has received about $50 billion in U.S. government aid, plans to sell its Hummer and Saab brands and scrap Pontiac and Saturn as it tries to streamline its operations. The company wants to focus on four core brands: Chevrolet, Cadillac, Buick and GMC.
Once the deal is signed, it still must be approved by the U.S. and Chinese governments, and Chinese regulators initially expressed reservations about Tengzhong’s ability to run such an enterprise.
GM already has seen one similar deal blow up at the last minute. Last week, auto dealership magnate Roger Penske’s bid to buy the Saturn brand fell apart just before the deal was finalized when a contract to make vehicles was rejected by the Renault board.
Hummer spokesman Nick Richards in Detroit would not comment on the timing of the deal.
In June, Sichuan Tengzhong announced that it had a tentative agreement with GM to buy the brand, which features large off-road vehicles that initially were developed for military use.
The consumer version of the Hummmer H3 and H3T pickup are assembled at the GM plant in Shreveport, La., which is slated for closure no later than June 2012. The larger H2 was made under contract with South Bend, Ind.-based AM General LLC, which also makes military versions of the vehicles. The workhorse military vehicles used in Iraq and Afghanistan are not a part of the deal.
The deal with Sichuan Tengzhong has long been expected. The Michigan Economic Development Authority in September approved a $20.6 million state tax credit over 10 years for Hummer to build a headquarters in the Detroit area.
The tax credit is contingent on Sichuan Tengzhong closing the deal for Hummer with GM, although a memo to the economic development authority said all definitive documents for the sale have been signed by the companies.
The headquarters would house global design, engineering, product planning, purchasing, sales, service, marketing and financing, Richards said. The company plans to invest $9.4 million over five years, he said.
The memo says the Hummer headquarters also would create another 641 jobs with other companies and generate $36.6 million in additional revenue for the state through 2019, excluding the tax break costs.
The company will decide on the headquarters’ location by Oct. 31, the memo says.
Sichuan Tengzhong is a little-known Chinese truck and industrial equipment maker.
The company’s CEO, Yang Yi, has said it will maintain Hummer’s headquarters and operations in the U.S., while investing in research and development of more fuel-efficient vehicles.
Tengzhong is likely benefiting from heavy stimulus spending on construction projects in China and from rebuilding after last year’s earthquake in Sichuan, given the company’s specialization in construction equipment and heavy trucks.
Tengzhong earlier said it broke ground on a 3.5 billion yuan ($500 million) factory to make oil field equipment.
AP Business Writer Alan Sayre in New Orleans contributed to this report.
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