Driving Sports

As part of GM's bankruptcy restructuring, Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd and General Motors Corp.  today confirmed details of a proposed transaction in which Tengzhong, a major industrial machinery group, will acquire the rights to GM's formerly hot, and now very not, HUMMER brand. As part of the deal, Tengzhong will acquire "a senior management and operational team" from GM. The Chinese industrial company will also take over existing HUMMER dealer contracts.

As shown in the photo at right, GM is between a rock and a hard place. So the plan is that Tengzhong will enter into a long-term contract assembly and key component and material supply agreement with GM. So, nothing much really changes, except that the stockholders of HUMMER are in China. In an earlier statement, GM said it expects to secure more than 3,000 U.S. jobs if this deal goes through.

Based in the Chinese province of Sichuan, Tengzhong is a privately-owned company and a leading manufacturer of road, construction and energy industry equipment for China. The company plans to expand into the premium off-road vehicle segment, so the HUMMER brand will be a strategic acquisition for the company. Tengzhong plans to continue to market HUMMER around the world.

"The HUMMER brand is synonymous with adventure, freedom and exhilaration, and we plan to continue that heritage by investing in the business, allowing HUMMER to innovate and grow in exciting new ways under the leadership and continuity of its current management team," said Yang Yi, CEO of Tengzhong. Mr. Yang continued, "We will be investing in the HUMMER brand and its research and development capabilities, which will allow HUMMER to better meet demand for new products such as more fuel-efficient vehicles in the U.S."

HUMMER will continue to maintain its headquarters and operations in the U.S., and will continue to be managed by its existing leadership team. The team intends to expand HUMMER's dealer network worldwide, particularly into new and underserved markets such as China. As demonstrated in the photo at right, this is a tough hill to climb.

The transaction is expected to close in the fall and is subject to customary regulatory approvals. Financial terms of the agreement will not be disclosed at this time.

So what does this mean?

For starters, it means the Chinese are still willing to invest in the United States, and invest in a big way. Further, they're investing in a smart fashion. Tengzhong is not packing up the HUMMER factory and moving it to Sichuan; they're leaving the whole structure in place. That should create warm fuzzies from the people who just a few days ago thought they were under GM's bankruptcy hammer.

Personally, I would never pay for a HUMMER, and I would certainly never buy the company. HUMMER was a fad that looked cool when President Bush was doing his "Mission Accomplished" routine on an aircraft carrier, but the panache of a huge, bloated Chevy Suburban with G.I. Joe bodywork has long since passed its sell-by date. Time to throw it over the cliff, as illustrated in the photo at right.

But as with so many American trends, even after it has gone stale in the U.S. the HUMMER has a long life ahead of it around the world. No matter where you go, there are uber-rich people who like to run around in big cars with an aggressive military look to them and a bunch of armed bodyguards. So the Chinese may not expect to sell a huge number of HUMMERs here, but building them here still makes good sense.

Some who follow the auto industry are sure to complain about selling out to the Chinese, but I'm 100% in favor of HUMMER's bailout coming from Sichuan instead of the U.S. Treasury. I wish the happy couple all the best for the future.