Sichuan Tengzhong Heavy Industrial Machines Co. said Wednesday it pulled out of the deal to buy the company from General Motors Co. Tengzhong failed to get clearance from Chinese regulators within the proposed timeframe for the sale, the Chinese manufacturer said.
GM said it will continue to honor existing Hummer warranties.
“We are disappointed that the deal with Tengzhong could not be completed,” said John Smith, GM vice president of corporate planning and alliances. “GM will now work closely with Hummer employees, dealers and suppliers to wind down the business in an orderly and responsible manner.” GM has been trying to sell the loss-making brand for the last year and signed a deal with Tengzhong in October.
However, resistance from Chinese regulators, who have been putting the brakes on investment in the fast-growing Chinese auto industry, created difficulties from the start.
As recently as Tuesday, private investors were trying to set up an offshore entity in a last-minute effort to complete the acquisition ahead of a Feb. 28 deadline. That plan, along with other options, was unsuccessful, according to a person close to the situation. The person declined to be identified in order to speak more freely.
“There’s no way forward with that,” this person said.
“We’re out of time.” Tengzhong, in a statement, said it was disappointed that it could not pursue the opportunity to build attractive, greener vehicles for sale in China and other new markets as well as Hummer’s traditional bases.
“Tengzhong worked earnestly to achieve an acquisition that it believed to be a tremendous opportunity to acquire a global brand at an attractive price,” it said, thanking GM, Hummer and its executives, and “the 3,000 people who produce and support Hummer.” GM spokesman Nick Richards said the automaker would still hear last-minute bids for the brand.
“In the early phases of the wind-down, we’ll entertain offers and determine their viability, but that will have to happen in pretty short order,” he said.
Hummer, which traces its origins to the Humvee military vehicle built by AM General LLC in South Bend, Indiana, acquired a devoted following among SUV lovers who were drawn to the off-road ready vehicles. But they drew scorn from environmentalists and sales never recovered after gasoline prices spiked above $4 a gallon in the summer of 2008.
Sales peaked at 71,524 in 2006. But in December 2009, only 325 Hummers were sold, down 85 percent from the previous year, according to Autodata Corp.
Sticker prices start at more than $42,500 and run to about $63,000, according to data posted at the Hummer.com Web site. The H3, the most fuel-efficient vehicle in Hummer’s lineup, averages about 16 mpg. The vehicles are built at GM’s factory in Shreveport, La.
Under the initial agreement to sell Hummer, Tengzhong would have received an 80 percent stake, while Hong Kong investor Suolang Duoji, who indirectly owns a big stake in Tengzhong, would have gotten 20 percent. The investors would also have owned Hummer’s nationwide dealer network.
