General Motors' deal to sell its Hummer brand to a Chinese company appeared on the brink of collapse last night, as a deadline approached without approval from regulators in Beijing.
Sichuan Tengzhong Heavy Industrial Machinery Corp, a little manufacturing company that has never before built cars, emerged as the surprise bidder for Hummer after GM went into bankruptcy last summer. But Hummer's reputation for building gas guzzlers conflicts with China's environmental goals and regulators were last night said to have blocked the deal.
Both sides were scrambling to find new ways to complete the deal, including arranging a transaction using an offshore investment company, but it appeared that the sale could now be months away. There was no public comment from the companies involved.
GM, which owns Chevrolet and GMC, has been selling or shutting down many of its less profitable brands, as part of a restructuring effort. It is now majority-owned by the US and Canadian governments, following a bailout last year, and has been accelerating plans to repay taxpayer loans. The collapse of the Hummer sale, coming after GM reversed its decision to sell Vauxhall and Opel in Europe, would further alter its future size and shape.
Tengzhong would still need Chinese approval to make and sell cars in the country, so even an offshore transaction is uncertain, although regulatory sources told Bloomberg they would not block a transaction.
The sale of Hummer to Tengzhong has been plagued with controversy since the beginning, not least because sceptics questioned whether a company better known for bridge parts had the expertise to run a car maker. It said it intended to keep Hummer's executive team in their jobs.
Within weeks of the announcement last June, China's National Development and Reform Commission (NDRC) expressed concern, but GM executives held out hope that its lobbying would succeed. The country has a complicated and fragmented system to regulate overseas investments, and the Ministry of Commerce had sounded a more positive note about the deal. Tengzhong had promised to build a more fuel-efficient Hummer to assuage environmental concerns.
The financial terms of the tentative deal have never been disclosed, but analysts had hoped that Hummer could fetch $100m for GM. An original deadline of the end of January for closing the deal had to be extended by a month as talks with regulators dragged on.
Saab is sold off at last
It has taken more than a year – and endless U-turns and dead-ends – but a deal to save Sweden's Saab was finally closed last night.
General Motors warned last year that it could no longer continue subsidising losses at its Swedish subsidiary, and its rejection of an offer to buy Saab from Holland's Spyker Cars seemed to deal the fate of the business. Yesterday, however, having had a second offer for Saab accepted by GM last month, Spyker finally signed on the dotted line, paying $74m for the company.
The sale safeguards the jobs of more than 3,400 workers in Saab factories and dealerships. The business has now exited the liquidation into which it was placed by GM as it sought to wind down the operation.
Jan Ake Jonsson, Saab's chief executive, will run the company, which Spyker insists can be returned to profit by 2012 – with the help of $1bn in loans and funding from the European Investment Bank and GM itself. Saab sold just 94,000 cars in 2008, and it is thought that figure fell sharply last year.Reuse content