China May Block GM's Sale of Hummer

Another twist in the Hummer saga.
Analysts are saying China is unlikely to approve GM's sale of Hummer to a Chinese company.

This, after the news a couple days ago that Hummer-perceived by some to be the embodiment of the brash and brawn of American culture-would become a Chinese-owned brand.

But what's on the line for America isn't so much a name: it's 3,000 U.S. jobs.

The reason the deal is "unlikely" is because Hummer is exactly the opposite of what China's auto industry is looking for right now, according to a Bloomberg article. The government is trying to develop a fuel-efficient industry that is globally competitive. As it is, China wants to shed some of the country's more than 100 automakers to ease competition.

Meanwhile, Hummer's U.S. sales are tanking as upward creeping gas prices and an uncertain job market steer buyers away from gas-guzzlers.

So, it's going to be a tough sell for Sichuan Tengzhong Heavy Industrial Machinery Co., the company that wants to buy Hummer.

Analysts and the Chinese media are skeptical that the Hummer deal will go through.

Chip Chaikin, managing director of the Shanghai-based Blue Point Capital Partners Asia, called the deal "pretty unlikely," in the Bloomberg article.

The Chinese state-owned newspaper, Shanghai Securities News, reported that China is unlikely to approve the deal, although it did not cite its source for this information.

GM officials are remaining optimistic on the Hummer deal...at least in public.

GM Chief Financial Officer Ray Young said on Friday to Bloomberg that he doesn't expect regulators to block the deal and that Tengzhong is "very excited" about it.

However, a Chinese government-owned newspaper seems closer to the source than a GM exec, at least to this news junkie, anyway.

Still, the unexpected could happen. The fact that Tengzhong has publicly made an offer for Hummer could suggest that they have the means to somehow pull it through.

One thing's for sure: Tengzhong has an uphill battle to fight. If it wants to acquire Hummer, the company would have to go in the face of the Chinese government's effort to ease competition in its auto industry, including the combination of China's 14 largest automakers into 10 by 2011. This move is meant to form more robust companies that can be big players on an international field.

China's also encouraging fuel-efficiency (a badly needed measure, too, looking at the state of pollution in some of the big cities)...while the 3.7-liter Hummer H3T gets 14 miles per gallon in the city, according to the U.S. Environmental Protection Agency.

Go figure. It's an unlikely match.