Auto industry watchers were left scratching their heads when newly bankrupt General Motors (GM) announced in June it had struck a tentative deal to sell its Hummer unit to an unknown Chinese maker of construction machinery, Sichuan Tengzhong Heavy Industrial Machinery.
A Hong Kong-based public relations official for Tengzhong declined to comment on the deal to CHINA ECONOMIC REVIEW, but most analysts believe the acquisition will be blocked by Beijing, highlighting the difficulties private Chinese firms face in acquiring even a willing target.
"There is a likelihood that the government will block the deal, simply because it doesn’t fit the industrial policy of China nicely,"said Teng Binsheng, a professor and associate dean at the Cheung Kong Graduate School of Business in Beijing.
China is encouraging production of smaller, fuel-efficient cars and the acquisition of a brand that epitomizes American gas guzzling would be discordant with that message. China is also seeking to consolidate its auto industry, rather than add another competitor.
There’s also a matter of financing. Tengzhong officials told state media in early June that the company – whose registered capital is reported to be US$43.9 million – would partially rely on bank lending to fund the acquisition.
"I don’t think they can get any loans from a Chinese bank to acquire Hummer and I don’t think they can persuade any bank that they can manage Hummer properly,"said John Zeng, a senior analyst for Asian automotive research for IHS Global Insight in Shanghai.
Jia Xinguang, an industry consultant on China’s auto sector, said the acquisition would be an opportunity for Tengzhong to learn the management and marketing skills necessary for running an international company while benefitting from the strength of the Hummer brand.
However, a Chinese acquisition of Hummer may diminish the brand’s singular appeal to consumers.
"Hummer [has been] successful partially because it is an American brand with all the military backing and applications. If you separate these two I’m not sure how the brand can be sustained,"Teng said.
There may be a deeper strategy underpinning Tengzhong’s bid, analysts said. Since announcing the acquisition, Tengzhong’s international profile has raised from that of an unknown to an aspiring global player. Even if the bid amounts to little more than a PR stunt, it has put Tengzhong on the map. GM, for its part, secured several more months to find a real buyer for Hummer.