Tengzhong will use its own capital and money raised from financial institutions to finance its purchase of GM's Hummer brand, said a senior manager from the Chinese machinery maker Wednesday.
"Tengzhong is a private company and it is difficult to judge its financial strength merely from its registered capital," Yang Yi, general manager of Sichuan Tengzhong Heavy Industrial Machinery Co, was quoted as saying by Sina Finance, a Chinese-language news portal, Wednesday. "We will use our own capital and money raised from financial institutions to fund the Hummer deal,"
US auto giant GM announced June 2 that it had signed a memorandum of understanding to sell its Hummer brand to Tengzhong.
In response to media reports that Morgan Stanley, Credit Suisse,and Merrill Lynch are the forces behind the Tengzhong move, Yang said that it is not the right time to give information in this regard, adding that talks with financial institutions has been going on for a long time and a final outcome will be due in a few weeks.
Asked whether Tengzhong will buy the Hummer brand between US$100 to US$500 million, Yang declined to comment. "We believe the price will be a reasonable one," he said.
China's National Development and Reform Commission, the country's top economic planner, was reportedly not supportive of the deal, citing two reasons: Tengzhong has no experience in making vehicles and Hummer autos are gas-guzzling, which is not in line with Chinese government's policy of developing energy-saving autos. China's Ministry of Commerce held the same opinion.
Yang said relevant procedures are in progress. "We respect government examination and will give full cooperation. They (relevant government departments) will not make a decision until they get everything clear," he said.
Tengzhong is intensely negotiating with GM about some purchase terms and exchanging opinions about a final agreement, Yang said.
"Our team is working with the Hummer team as well as a GM team to make a detailed plan for Hummer's future development," Yang said. "The memorandum of understanding is an important document but we are holding in-depth negotiations to produce a financial agreement."
GM's once-popular Hummer brand is facing a shrinking market share. In US, its largest market, Hummer sold only 27,468 units in 2008, a sharp drop from the 71,159 units in 2006. Figures from unknown sources show that in the China market, Hummer sold only 69 units in 2008 and altogether 334 units since 2002.
"Hummer hasn't officially entered the China market. It has no dealership network here, so there is no accurate numbers for the sales," Yang said.
Yang said if the deal goes smoothly, the company will strive to promote the Hummer brand in other markets.
"Currently, most of Hummer's sales are concentrated in North America. The Hummer brand has great potential to increase presence in other markets. It is a reasonable idea to build a production base outside the US."
However, he added, the new production base will be inline with relevant policies and regulations in China and with the company's development.
Tengzhong will also invest to develop fuel-efficient Hummer to emerge better for international expansion.
"GM's current troubles, coupled with the news of selling Hummer brand, were causing doubts for potential Hummer buyers," said Yang. "Hummer champions the concept of sports, exploration and pursuing a better life. If Hummer can integrate this concept with the environmental-friendly and fuel-efficient trend, it will have a promising outlook."
Yang also denied internet rumors that Tengzhong will also acquire Hummer's military segment, saying the deal involves only the civil part.
For more information, please read the full Chinese coverage at:
http://life.news365.com.cn/yw/200906/t20090611_2352606.htm
(China.org.cn by Yuan Fang, June 11, 2009)
