General Motors (GM) and Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd (Tengzhong) have just announced that the companies have entered into a definitive agreement that will allow Tengzhong to acquire GM’s premium all-terrain Hummer brand.
Under the terms of the definitive agreement, the buyer will acquire the ownership of the Hummer brand, trademark and tradenames, as well as specific intellectual property license rights necessary for the manufacture of Hummer vehicles. The buyer will also assume the existing dealer agreements relating to Hummer’s dealership network.
Tengzhong will purchase Hummer through an investment entity, in which it will hold an 80% share. Mr. Suolang Duoji, a private entrepreneur with holdings that include the Hong Kong-listed nardite producer Lumena, will have the remaining 20%.
Financial terms of the agreement were not disclosed.
“This transaction marks an exciting step for both Tengzhong and Hummer, as we invest in a business that has significant opportunity in the U.S. and around the globe,” said Yang Yi, chief executive officer of Tengzhong. “We are excited about some of the initiatives already underway at Hummer that we believe our investment will be able to accelerate, particularly related to the creation of the next generation of more fuel-efficient vehicles to meet not only future regulations but also customer expectations.”
Under the agreement, Hummer will vehicle manufacturing, key components and business services from GM. GM’s Shreveport assembly plant would continue to contract assemble the H3 and H3T and AM General’s Mishawaka (Indiana) assembly plant will continue to assemble the H2. Both facilities will produce the specified vehicles until June 2011, with an optional one-year extension until June 2012. The deal is said to secure more than 3,000 jobs in the U.S. related to the sale and manufacturing of the vehicles.
In the short run the good news is that H3 SUVs will be made in Shreveport along with the Chevy Colorado and GMC Canyon pickup trucks. The question remains how long does Hummer stay in Shreveport? After 2011 there are a lot of choices. GM could Hummer to stay. GM could shut the plant. The Chinese could buy the plant or move production to China.
Hummer will continue to be managed by members of its existing team including James Taylor, who will remain in his current role as chief executive officer. Prior to joining Hummer, Taylor was General Manager of Cadillac.
The transaction is subject to customary closing conditions and regulatory approvals and/or review by government agencies in the U.S. and China. The completion of the definitive agreement enables the companies to continue and further the overall regulatory review process.