General Motors has reached an agreement to offload Hummer onto China's Sichuan Tengzhong Heavy Industrial Machinery, with Tengzhong taking an 80 percent stake and a private investor consuming the rest.
Details on the deal (available in the press release after the jump) include Hummer contacting vehicle manufacturing from GM, with the General's Shrevport and Mishawaka plants continuing to produce vehicles through June of 2011, with a possible extension until 2012. A recent report says the sale will net GM around $150 million, although the transaction still has to be approved by both U.S. and Chinese regulatory agencies, which could come later this year or in early 2010.
Tengzhong, which only produces commercial trucks and industrial equipment, has never entered into consumer vehicles before, but according to Yang Yi, chief executive officer of Tengzhong. "We are excited about some of the initiatives already underway at HUMMER that we believe our investment will be able to accelerate, particularly related to the creation of the next generation of more fuel-efficient vehicles to meet not only future regulations but also customer expectations."
[Source: GM | Photo by Scott Olson/Getty]
General Motors and Tengzhong Sign Definitive Agreement For Sale of HUMMER
DETROIT and SICHUAN, Oct. 9, 2009 - General Motors (GM) and Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd (Tengzhong), today announced that the companies have entered into a definitive agreement that will allow Tengzhong to acquire GM's premium all-terrain HUMMER brand.
Under the terms of the definitive agreement, the buyer will acquire the ownership of the HUMMER brand, trademark and tradenames, as well as specific IP license rights necessary for the manufacture of HUMMER vehicles. The buyer will also assume the existing dealer agreements relating to HUMMER's dealership network.
Tengzhong intends to purchase HUMMER through an investment entity, in which it will hold an 80 percent stake. Mr. Suolang Duoji, a private entrepreneur with holdings that include the Hong Kong-listed thenardite producer Lumena, will hold the remaining 20 percent stake. Financial terms of the agreement were not disclosed.
The transaction is subject to customary closing conditions and regulatory approvals and/or review by government agencies in the U.S. and China. The completion of the definitive agreement enables the companies to continue and further the overall regulatory review process.
"HUMMER is a strong global niche brand and this agreement signifies another important milestone in writing the next chapter for both GM and HUMMER," said Fritz Henderson, GM President and CEO. "For HUMMER, the combination of its knowledgeable leadership team, vehicle design expertise and the capital financing of Tengzhong portend a successful future."
Under the agreement, HUMMER would contract vehicle manufacturing, key components and business services from GM during a defined transitional time period. For example, GM's Shreveport assembly plant would continue to contract assemble the H3 and H3T and AM General's Mishawaka assembly plant will continue to assemble the H2. Both facilities will produce the specified vehicles until June 2011, with an optional one year extension until June 2012. The deal is expected to secure more than 3,000 jobs in the U.S. related to the sale and manufacturing of HUMMER vehicles.
HUMMER will continue to be managed by members of its existing leadership team including James Taylor, who will remain in his current role as HUMMER's chief executive officer. Prior to joining HUMMER, Taylor was General Manager of Cadillac where he oversaw a reinvigoration of the brand, leading key innovations in design and technology as well as the development of new models.
"We are fortunate to have a partner who understands and recognizes the importance of continuing investment in HUMMER's heritage as a U.S.-based and branded company with a view toward capitalizing on global opportunities," said Taylor. "Backed by a privately owned and well-capitalized company, we are going to be able to focus on providing customers with more efficient models that deliver HUMMER's promise of authentic, purpose-built design and engineering."
Once the transaction is complete, HUMMER will become the first automaker to offer an alternative fuel powertrain in every model, with the addition of E85 FlexFuel capability in the 2010 H3 and H3T. HUMMER is also in the process of obtaining emissions certification for a diesel H3 that will be introduced in markets outside of North America. The brand's future product development will focus on improving efficiency and performance in current HUMMER models with alternative fuel powertrains, more efficient gas engines, 6-speed transmissions and diesel engines.
"This transaction marks an exciting step for both Tengzhong and HUMMER, as we invest in a business that has significant opportunity in the U.S. and around the globe," said Yang Yi, chief executive officer of Tengzhong. "We are excited about some of the initiatives already underway at HUMMER that we believe our investment will be able to accelerate, particularly related to the creation of the next generation of more fuel-efficient vehicles to meet not only future regulations but also customer expectations."
Credit Suisse is acting as exclusive financial advisor and Shearman & Sterling is acting as international legal counsel to Tengzhong on this transaction. Citi is acting as financial advisor to GM.
For more information on the agreement go towww.transactioninfo.com/tengzhong.