Monday, June 8, 2009
OK, I have to admit that I am fascinated at the slow-motion train wreck that is the proposed sale of Hummer to a Chinese company in the foothills of the Himalayas. I understand that GM and its advisors are just looking to off-load this division, but I wonder what the buyer is thinking. Do they really think they can operate a 3,000 person, money-losing manufacturing operation in the US from Chengdu? Of course, it’s not impossible, given that the actual manufacturing of the civilian Hummer (H2) is done by AM General (here) under contract in a plant just adjacent to their factory that produces the military version of the vehicle. But, the H3 might be more difficult as it is manufactured at the GM truck plant in Shreveport, LA (here).
The Tengzhong transaction will require that Tengzhong takeover the contract with AM General for the production of the H2 and also enter into some sort of transition services agreement with GM for production of the H3 unless it wants to carveout the line from the existing Shreveport plant that currently builds the H3 along with the Chevy Colorado and the GMC Canyon and run that themselves somehow. What happens when GM decides to ditch the Colorado and the Canyon? Who runs the factory then? Or is Tengzhong going to buy those lines as well?
Though it was easy to announce, I suspect this transaction will be much more difficult for the Chinese buyer to successfully accomplish. I’m not alone. Here’s a sampling of Chinese English-language press reaction:
“While China has made clear its determination to pursue energy-saving, environment-friendly and sustainable growth, the purchase of a US auto brand famous for being a gas-guzzler obviously does not make sense.”
“Tengzhong plans to maintain the current management team for Hummer and develop more energy-efficient models, but this is just a fantasy. If the current team could prevent the brand from slumping in any way, they would have done so before.”
On the other hand there was this from the People’s Daily, the party organ: