GM to shut down Hummer after China deal fizzles

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General Motors Co will wind down its iconic but tarnished Hummer brand after Chinese regulators rejected a USD 150 million bid by an obscure Chinese machinery maker to buy the money-losing SUV line.

GM had been trying to complete the deal by the end of February after reaching a definitive agreement in October to sell Hummer to Tengzhong, a little-known heavy machinery company based in Sichuan province.

The collapse of the deal represents another setback for GM, which had been working to shed unprofitable brands and focus on its four core brands -- Chevrolet, Cadillac, Buick and GMC -- after emerging from bankruptcy in July.

Closure of Hummer would put about 3,000 jobs at stake, including manufacturing workers, dealers, staff members, and other areas, GM spokesman Nick Richards said. The brand has 153 US dealers.

A brand that grew out of the US military multipurpose vehicle known as the Humvee produced by AM General, Hummer was lauded early on for a tough image but became synonymous with gas-guzzling excess when consumers became more interested in high oil prices and environmental responsibility.

GM bought the Hummer brand from AM General in 1999 and went on to produce several civilian models.

"We have considered a number of possibilities for Hummer along the way, and we are disappointed that the deal with Tengzhong could not be completed," John Smith, GM vice president of corporate planning and alliances, said in a statement.

"GM will now work closely with Hummer employees, dealers and suppliers to wind down the business in an orderly and responsible manner," Smith said.

Tengzhong, in an emailed statement to Reuters, said it and GM have decided to terminate the agreement after failing to win Chinese regulatory approval within the proposed time frame.

"Tengzhong worked earnestly to achieve an acquisition that it believed to be a tremendous opportunity to acquire a global brand at an attractive price," the company said.

Industry experts and sources with knowledge of the situation told Reuters Tengzhong had faced questions in China over how a little-known heavy machinery maker with no international experience could buy and turn around a struggling foreign brand like Hummer.

Many also said that regulators might balk at letting a Chinese firm acquire a US brand known for making gas-guzzling vehicles at a time when China was emphasizing the development of more environmentally friendly technologies.

The privately owned Tengzhong was formed in 2005 through several mergers and has fewer than 5,000 employees.

THIRD FAILED SALE BY GM
GM said it will continue to honor warranties and provide service support and spare parts to current Hummer owners.

This marks the third sale of a GM brand that has fallen through or been abandoned by the automaker, which was restructured in bankruptcy last year, backed by some USD 50 billion in US taxpayer funding.

A tentative deal reached by GM to sell its Saturn brand to Penske Automotive Group Inc also collapsed at the end of September, just before it was expected to close.

GM also scrapped a plan to sell its Germany-based Opel unit to a group led by Magna International last year.

The wind-down of Hummer is expected to take several months and GM will continue to entertain viable offers early in the process, Richards said.

GM has not built any new Hummers at its plant in Shreveport, Louisiana, since mid-January and currently has about 2,500 vehicles in dealer inventory.

The Shreveport plant continues to build the GMC Canyon and Chevrolet Colorado mid-sized trucks.

GM put Hummer up for sale initially in summer 2008, a full year before the automaker fell into a government-supported bankruptcy reorganization in which it planned to divest Hummer, Saturn, Saab and a controlling stake in Opel.

Hummer's U.S. sales have plunged to just above 9,000 last year from nearly 56,000 in 2007. About two-thirds of its sales have been in the United States and one-third internationally.