Chinese company to buy Hummer from GM

updated 1:34 p.m. ET June 24, 2009

NEW YORK - General Motors Corp. took a key step toward its downsizing on Tuesday, striking a tentative deal to sell its Hummer brand to a Chinese manufacturer, while also revealing that it has potential buyers for its Saturn and Saab brands.

China’s Sichuan Tengzhong Heavy Industrial Machinery Co. said Tuesday afternoon that it reached an agreement to acquire the brand from GM for an undisclosed ammount. The Detroit automaker had announced Tuesday morning that it had a memorandum of understanding to sell the brand of rugged SUVs, but it didn’t identify the buyer.

Sichuan Tengzhong deals in road construction, plastics, resins and other industrial products, but Hummer would be its first step into the automotive business.

GM said the sale will likely save more than 3,000 U.S. jobs in manufacturing, engineering and at various Hummer dealerships. Tengzhong said it will assume GM’s existing agreements with Hummer dealers.

“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,” Chief Executive Yang Yi said in a statement.

As part of the proposed transaction, Hummer will continue to contract vehicle manufacturing and business services from GM during a transitional period. For example, GM’s Shreveport, La., assembly plant would continue to contract to assemble the H3 and H3T through at least 2010, GM said. AM General LLC in Mishawaka, Ind., makes the larger H2 under contract for GM.

Hummer will keep its existing management team and remain based in the United States, the companies said. Tengzhong said it expects to expand the brand’s dealer network worldwide, including to China.

“GM is close to a sale of its Hummer brand, which is good news for the 3,000 Americans who will be able to keep their jobs, the two American plants that will remain open and the more than 100 Hummer dealers that should be able to stay in business all around the country,” White House spokesman Bill Burton said earlier in the day.

On Monday, the Shreveport plant, which has about 800 workers, escaped being among 12 plants that GM said would be shut down by next year. The plant, which employed 3,000 several years ago, also produces Chevrolet and GMC pickups.

Johnny Bell, 59, who has worked at GM for 28 years, said many workers are still concerned about the plant’s long-term future.

“Good news is good news, but we want all the news,” he said. “We’re concerned about what happens after 2010.”

Morgan Johnson, head of the United Auto Workers local at the plant, said GM indicated to the union that pickup assembly would continue in Shreveport through 2012.

“We’re just happy that the doors are still open considering all the plant closings,” said Sharon Brock, 52, who has worked at the sprawling plant for 26 years.

GM also said Tuesday that it has 16 buyers interested in purchasing its Saturn brand, while three parties are interested in the Swedish Saab brand.

Chief Financial Officer Ray Young told reporters and industry analysts on a conference call that GM is continuing to pursue manufacturing agreements with a new Saturn buyer.

GM would like to sell the money-losing Saturn brand’s dealership network, contracting with the new buyer to make some of its cars while the buyer gets other vehicles from different manufacturers.

At the same time, bridge loan discussions with the Swedish government are progressing, Young said.

GM, which filed for Chapter 11 bankruptcy protection in New York on Monday, is racing to remake itself as a smaller, leaner automaker. In addition to its plan to sell the Hummer, Saab and Saturn brands, GM will also phase out its Pontiac brand, concentrating on its Chevrolet, Cadillac, Buick and GMC nameplates.

The company hopes to follow the lead of fellow U.S. automaker Chrysler LLC by transforming its most profitable assets into a new company in just 30 days and emerging from bankruptcy protection soon after.

But GM is much larger and complex than its Auburn Hills-based rival and isn’t up against Chrysler’s tight June 15 deadline to close its deal with Fiat Group SpA.

Interactive GM's road to bankruptcy A look at key events in General Motors' long and sometimes troubled history.

Sharon Lindstrom, managing director at business consulting firm Protiviti, said the companies pose different challenges. But as with Chrysler, she notes that the Treasury Department made sure many of GM’s moving parts were in order ahead of time so a quick bankruptcy reorganization might be possible.

“They had a lot of their ducks in a row because the terms of the government financing forced them to get all the parties to the table in a very, very short period of time,” Lindstrom said.

Separately, the German government said Tuesday it paid out the first euro300 million ($425 million) in bridge loans to GM’s Adam Opel GmbH division. The loans are part of a deal to shrink GM’s stake in Opel and shield it from GM’s bankruptcy protection filing in the U.S.

Canadian auto supplier Magna International Inc. and Russian-owned Sberbank will acquire 55 percent of Opel.

A sale of the Hummer brand had been expected. Chief Executive Fritz Henderson had said in April that the automaker was expecting final bids from three potential buyers within the month.

Eric Lane, vice president of Baton Rouge, La.-based Gerry Lane Enterprises, which has four dealerships — including one offering Hummers — welcomed the sale.

Lane said a lack of new products and the recession figured into the Hummer equation much more than last year’s runup in gasoline prices. “I haven’t had a single owner complain about mileage. Nobody buys a Hummer because of the gas. You don’t buy a vehicle for $60,000 and worry about the price of gas.”

Critics had seized on the rugged but fuel-inefficient Hummer as a symbol of excess as GM’s financial troubles grew and gas prices rose. Sales at Hummer, which is known for models with military-vehicle roots, have been in a steep slide since gasoline prices rose to record heights last summer. For the first five months of this year, Hummer sales are down 64 percent.

MORE FROM AUTOS

Autos Section Front

CEO lays out ambitious Chrysler road map Cars are approaching ‘auto’ pilot mode Review: Toyota Venza falls short What automakers have in store for 2010 Ford to put air bags into back seat belts Clunker deals: old Ford pickups for new ones New Dodge models part of Chrysler’s plans U.S. rips Toyota statement on floor mats GM posts first sales gain in nearly two years General Motors board decides not to sell Opel Autos Section Front   Add Autos headlines to your news reader: