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Hummer deal leaves many scratching their heads
(China Daily)
Updated: 2009-06-15 15:33
US auto giant General Motors recently announced a surprise deal, one day after filing Chapter 11 bankruptcy, that it will sell its Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery, a little-known company based in China's southwest. Four-year-old Tengzhong is one of the largest private companies in Sichuan province. Over its short history it acquired three State-owned enterprises in the province and now specializes in making special-purpose vehicles and construction machinery. The announcement gave rise to a debate on the viability of the deal, with most analysts pouring scorn on it, saying China has made clear its determination to pursue environmentally friendly and sustainable growth, so purchase of a US auto brand famed as a gas-guzzler obviously does not make sense. They doubt if Tengzhong has the ability to turn Hummer's business around. But other analysts said the global economic crisis provided the company with a good bargain and Tengzhong can use Hummer's technologies to develop its own products. Experts and auto dealers gave their views on the websites of CCTV, Oriental Morning Post and Sina.com:
Zhong Shi, auto industry analyst "The market potential for such a gas-guzzler itself will not be big in China. What attracted Tengzhong is not the brand name Hummer, but the US company's technologies in producing heavy-duty SUVs. Tengzhong can adopt Hummer's technologies to develop its own special-purpose vehicles." Zhang Youwen, director of world economy research center of the Shanghai Academy of Social Sciences "This is an opportunity for Chinese companies to really go out. In previous Sino-foreign partnership deals, China was only a production base for foreign companies and Chinese companies could not control the brand or the sales channels. But this acquisition will be different. The sales channel and supplier relationships will be very important for Tengzhong's growth. It would be significant for the future development of China's manufacturing industry." Xie Yu, general manager of Shanghai Euro Asia Motor Sales & Service Co Ltd "China has a big market for Hummer. The wealthy coal mine bosses in Shanxi province are only part of its customer base. Those who buy the Hummer H2 are successful men, aged between 40 and 50, who own four to five cars. The Hummer H3 is popular among 30-something-year-old people, including women." CONS Wang Qing, deputy director of market economy research department of the Development Research Center of the State Council "The acquisition doesn't seem to be useful to Tengzhong. It will be a huge challenge for it to consolidate Hummer's resources as the company has a totally different cultural background." Ouyang Minggao, director of department of automotive engineering of Tsinghua University "The brand image of Hummer as a luxurious gas-guzzler does not fit China's determination for energy conservation. It is risky for a private enterprise that has no experience in passenger vehicle production to acquire such a brand because in the future there will be regulations that will restrain demand for such vehicles." Fu Hui, director of auto industry research department of 21st Century Business Herald "Chinese companies are not familiar with the rules of the American auto industry. A big challenge for Tengzhong will be dealing with Hummer's labor union. Another problem is that Tengzhong has no experience in producing passenger vehicles, while Hummer's core technologies and intellectual property rights will still belong to GM, according to GM's bankruptcy filing." (For more biz stories, please visit Industries)
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