Hummer Sale Goes Through

GM entered into a deal to sell the troubled Hummer brand to a Chinese conglomerate. The deal was in trouble, but Hummer has now been sold for a tidy $150 million.

The fall of General Motors necessarily required some serious pruning if the company was going to come back strong. The Hummer brand was a classic dead weight that needed to go. The question was who would buy the brand? The answer? The Chinese!

To the surprise of just about everyone, China's Sichuan Tengzhong Heavy Industrial Machinery Co. came up with the winning bid to buy Hummer from GM. The surprise was so complete that even the Chinese government didn't know. This was key as the government apparently was very interested in learning how a heavy industrial machinery company was going to run a car company.

The initial answer was apparently not very reassuring. We know this because the Chinese government started balking at the purchase. The deal nearly fell through, but political pressure was applied. Nearly four months after it was first announced, the deal went through on October 9, 2009.

So, what does this all mean? Well, the deal required Tengzhong to guarantee a certain number of jobs will remain in the United States for a few years. Ultimately, however, the deal simply frees GM from the brand. The bigger question is what is going on in China? It is difficult to see any market for the Hummer brand in the current economic condition and with fuel prices expected only to continue up in the future. With only $150 million on the line, however, it is not a deal that would kill Tengzhong if it fails.

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