One of the biggest surprises of last year came in June, when the little-known Sichuan Tengzhong Heavy Industrial Machinery company announced that it was planning to enter the car business with an audacious bid for Hummer.
Nine months on, the deal appears to be unravelling fast. Tengzhong says that it will clarify its position this Sunday, after having already delayed a month after the first deadline for the bid.
The Chinese regulators, apparently, don’t like the idea. Tengzhong has never made cars before, and there are rules forbidding inexperienced players from entering an already over-crowded market. The government, after all, is trying to force consolidation among the country’s 100 or so car manufacturers.
The drama has dragged on for such a long time now that few people will be surprised if the bid collapses. But where does that leave Hummer?
Unfortunately, the hulking cars have dated very quickly. Today, they bring to mind the worst excesses of the Bush era – a military vehicle that guzzles gas.
But despite this, the brand still has value. Despite a difficult year in 2008, Hummer outsold Porsche in the US and turned an eight-figure profit. It may be out of fashion among the greenies, but it is likely to do well in many markets, including China.
If Tengzhong does drop out, there may be other suitors, perhaps even from China. But if I was in charge of Hummer, I would be looking to spin it out of GM as a standalone company through an IPO, and then to set up shop in Shanghai as soon as possible.