Much hope, almost, for GM… to the drain?


Posted: 06 June 2009 0016 hrs

090606-0016hrs A Hummer vehicle

SHANGHAI: A little-known Chinese machinery maker's plan to buy the Hummer brand from General Motors could face objections from Chinese regulators, media reports said Friday.

Struggling US auto giant General Motors announced this week it had reached a tentative deal to sell the brand to privately-held Sichuan Tengzhong Heavy Industrial Machinery Co, a day after filing for bankruptcy.

"Government agencies are unlikely to agree," the official Shanghai Securities News reported, citing an unnamed source.

"This overseas acquisition is not in line with the state's auto industry policy. In principle, domestic auto companies are not encouraged to make outbound acquisitions at the moment," the source told the newspaper.

The deal, expected to be closed by the end of the third quarter, will need nods from several government agencies, including the Ministry of Commerce and the National Development and Reform Commission, a powerful economic planner.

There are also concerns over whether Tengzhong is capable of funding the deal to help revive sales of the gas-guzzling sports utility vehicle, against Beijing's policy to encourage fuel-efficient vehicles.

The Chinese company and General Motors did not disclose any financial details of the deal but analysts expect Tengzhong could pay up to 500 million dollars for the Hummer brand.

Tengzhong, based in Chengdu city in southwestern Sichuan province, manufactures heavy machinery equipment for use in road and bridge construction, and in the energy industry.

Officials at Tengzhong declined to disclose the company's financial performance when contacted by AFP.

Reports in Shanghai Securities News and other domestic media said the company was indirectly controlled by 46-year-old mining tycoon Li Yan, who is also the chairman of mining company Lumena Resources Corp.

Lumena, preparing to list shares on the Hong Kong Stock Exchange, plans to raise up to 1.48 billion Hong Kong dollars (190 million US dollars) from the initial public offering, the reports said.

- AFP /ls

From; see the source article here.

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