Report: Says China Likely to Reject Hummer Acquisition

BEIJING June 26, 2009; Joe McDonald writing for the AP reported that China's planning agency is likely to reject a Chinese company's bid to acquire General Motors Corp.'s Hummer unit, in part because its gas-guzzling vehicles conflict with Beijing's conservation goals, state radio reported.

The National Development and Reform Commission is also likely to say Sichuan Tengzhong Heavy Industrial Machinery Corp., a maker of construction machinery, lacks expertise to run Hummer, China National Radio said late Thursday. It cited no source.

Tengzhong said it has yet to reach a definitive agreement with GM, which the company said previously was required to make a formal request for government approval of the deal.

"Some people may have views and speculation but the Chinese government has a process that we respect," said a company statement. "We do not yet have a definitive agreement, but are developing our proposals with GM and Hummer and we will continue to engage with the appropriate authorities in an appropriate manner."

Employees who answered the phone at the NDRC referred questions to its foreign affairs office, where calls were not answered.

Hummers, which roar along on oversize tires and can weigh up to five tons, are based on U.S. military vehicles that gained fame during the 1991 Gulf War. But sales have been battered by soaring fuel prices.

Tengzhong, based in the southwestern city of Chengdu, emerged as Hummer's surprise buyer this month after GM sought court protection from its creditors. The companies said the sale still required regulatory approval and refused to disclose the price.

Auto industry analysts questioned how Tengzhong, which makes construction vehicles such as cement mixers and tow trucks, could succeed with Hummer, known as "Han Ma," or Bold Horse, in China.

GM said the planned sale would save some 3,000 jobs in the United States. Tengzhong said it would invest in research to create more fuel-efficient Hummers and would keep Hummer's headquarters and manufacturing in the United States.

The Chinese government is trying to promote conservation and use of more fuel-efficient vehicles. It has cut sales taxes on cars with smaller engines and is encouraging automakers to develop electric and other alternative-energy vehicles.

Communist authorities are encouraging companies to expand abroad to diversify the economy but have cautioned against being too hasty or ambitious.

Tengzhong is privately owned, which means it is free of some of the controls on Chinese state-owned companies. But regulators still can block foreign acquisitions.