The Wall Street Journal reports, "An obscure Chinese construction-equipment maker plans to buy Hummer -- a brawny symbol of America across the globe -- from General Motors Corp. in a deal that presages the future shape of the international auto industry."
The exact price that Sichuan Tengzhong Heavy Industrial Machinery Co will pay for the SUV-only brand has not been revealed. The UPI reports, "The Chinese government vets international purchases over $100 million. Analysts said the Hummer brand -- with sales that dropped 62 percent to 5,013 in the first quarter -- would likely fetch under $500 million."
The company, according to the Journal, plans to retain most of Hummer's U.S. leadership, and more than 100 free-standing Hummer dealers. GM had already planned to eliminate the giant Hummer H2, but Sichuan Tengzhong will reportedly keep the rest of Hummer's lineup, and U.S. production, intact.
The move is a huge gamble for Sichuan Tengzhong. The AP reports that the Chinese firm "is four years old and has just 4,300 employees. It makes vehicles, but they are cement mixers and tow trucks, not passenger cars." The company "is based in China's mountainous southwest, far from the east coast heart of China's auto industry." But it becomes the first Chinese company to crack open the U.S. auto market, leaping ahead of more established Chinese automakers that analysts have long expected to make a run at the American car market in the next few years.
GM had sought to eliminate the brand because of slow sales and a new set of fuel-economy regulations that will take effect over the next several years. The Journal explains, "By pulling the brand's hulking SUVs out of its lineup, [GM's] corporate average fuel economy, or CAFE, will fall." But Sichuan Tengzhong will be left trying to bring Hummer into compliance with the stricter rules. Hummer Chief Executive Jim Taylor told the Journal "that electric powertrains could help Hummer meet CAFE rules down the road."
The company may also face the challenge of retaining Hummer's macho, flag-waiving image. The AP notes, "Hummers are based on U.S. military vehicles that gained fame during the 1991 Gulf War - a link that fuels their macho appeal. It is unclear whether buyers who love their attention-grabbing looks and ability to drive over boulders will be as gung-ho if their maker is from communist-led China."