Update 2: GM Reaches Tentative Agreement to Sell Hummer Brand To Chinese Company

Update #2 June-02-2009 01:15 PDT:

GM has officially confirmed Sichuan Tengzhong Heavy Industrial Machinery Company Ltd., as the candidate buyer for the Hummer brand.

In a joint press release this afternoon, GM and Sichuan Tengzhong said Tengzhong will acquire the rights to the Hummer brand, along with Hummer's senior management and operational team. Tengzhong will also assume Hummer's existing dealer agreements related to Hummer's dealership network.

Hummer trucks are not officially sold in China today, though gray market imports have been purchased by a small number of Chinese buyers. The Chinese market is expected to open to Hummer shortly after the sale is completed. The trucks will be manufactured in the U.S. for the foreseeable future, Hummer spokesman Nick Richards told PickupTrucks.com this afternoon.

As we reported this morning, the transaction won’t include Hummer-related military technology or military truck production, which is currently managed by Indiana-based AM General. GM acquired the rights from AM General to make Hummer trucks for civilian applications.

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Update #1 June-02-2009 09:30 PDT:

The New York Times is reporting that Hummer's undisclosed buyer is a Chinese company, Sichuan Tengzhong Heavy Industrial Machinery Company Ltd., according to NYT sources in Beijing. Sichuan Tengzhong is known in China for making a wide range of heavy equipment.

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General Motors has officially reached an agreement to sell its Hummer off-road brand to a yet-to-be-named buyer. The term sheet signing was announced by GM in a press release early today.

“GM has signed a memorandum of understanding with an investor,” Hummer spokesman Nick Richards told PickupTrucks.com early Tuesday morning. “Both parties have agreed to the basic terms [of the purchase], but the financial details and buyer's name are not being released at this time. That’s expected to be announced some time in the near future.”

Richards said the buyer meets all of GM’s criteria to purchase and operate the Hummer brand’s civilian truck production: The buyer has a proven track record in international business, knows the Hummer brand can perform better globally, has a long-term development plan and is willing to invest in future products.

“Hummer is a strong brand,” said Troy Clarke, president of GM North America. "I’m confident that Hummer will thrive globally under its new ownership. And for GM, this sale continues to accelerate the reinvention of GM into a leaner, more focused and more cost-competitive automaker."

The transaction won’t include Hummer-related military technology or military truck production, which is currently managed by Indiana-based AM General. GM acquired the rights from AM General to make Hummer trucks for civilian applications.

What future products might the newly spun-off Hummer develop?

“The [Hummer] H4 [also known as the HX] and H3T concepts are good examples of where Hummer’s future products could go,” Richards said.

The rugged two-door H4 concept was designed to compete against the Jeep Wrangler, while the tough H3T concept previewed the production version of the 2009 Hummer H3T crew cab pickup. The H3T concept’s two-door cab configuration prioritized off-road capability over passenger space.

“The H3 SUV and pickup and H2 [full-size truck] will also continue in the portfolio,” Richards said. “We’re working on ways to change the H2 beyond [its most recent update in] 2008.”

New alternative-fuel and diesel powertrains are also expected to be developed for use in future Hummers.

Pending the successful completion of the deal, the sale of Hummer is expected to secure more than 3,000 U.S. jobs in manufacturing and engineering, and at Hummer dealerships around the country. That figure takes into account GM employees building the H3 SUV and H3T pickup truck at GM’s Shreveport, La., plant, but excludes contracted AM General workers making the H2 in Indiana.

“The industry total, including H2 production in Indiana and elsewhere, is approximately 8,000 to 10,000 jobs saved,” Richards said.

Additionally, Richards said that no Hummer dealerships will be closed because of the memorandum of understanding. GM had previously announced plans to cut about 40 percent of its 6,000-dealer network over the next 18 months.

Hummer’s U.S. domestic production is expected to receive a boost by shifting all current overseas H3 production from GM’s Port Elizabeth, South Africa, plant back to Shreveport. Port Elizabeth builds right-hand-drive H3s for export into markets in Europe and Asia, as well as for local sale. Richards said about 30 percent of Hummer’s sales volume occurs in countries outside North America, but that figure is expected to grow under the new management team.

Richards said that GM will also provide transitional assistance to Hummer for an undisclosed period, including engineering and information technology support, dealer support and parts services. Vehicle warranties will be fully honored during and after the transition.

The sale is expected to close by the end of the third quarter of this year, and is subject to customary closing conditions, including receipt of applicable government regulatory approvals.