(Updated 12:02 ET — Bloomberg is now reporting that GM has “failed to win approval from Chinese regulators to sell its Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery Co.” At this point as the news is breaking, we think its important to note that we’ve heard no official word from any government or party involved. Also, the report stated that Chinese regulators “wouldn’t stand in the way of a deal completed elsewhere,” which would imply the use of an offshore vehicle, something that the two companies have been discussing for over a year.)
The financing details of the HUMMER deal were one of its greatest strengths – Chinese manufacturer Tengzhong had already secured the money necessary to operate an international automotive company from some of China’s biggest banks, and had the cash on hand for the purchase price. However, the New York Times is reporting today that some of those banks have pulled out due to the uncertainty of regulatory approval from China.
As early as July 2009 (and later when the contents of the deal were leaked), we heard about Tengzhong’s intent to establish an ‘Offshore Vehicle’ to limit the liability to the parent company and investors, but today we’re learning that it may also be used to circumvent the Chinese regulatory process. If the deal were to not get the blessing from the Chinese government, production of HUMMERs in China (presumably for overseas markets) wouldn’t be possible which has apparently spooked some of the Chinese investing banks. Reportedly, the banks also aren’t too keen on the idea of investing in something the government wasn’t in favor of.
Both GM and Tengzhong are eager for the deal to be completed, having both undoubtedly spent millions to complete the deal at this point. While no official reasons have been given by the Chinese government at this point, some speculate tense U.S. and China relations and HUMMER’s poor image in the “Green Community,” a group that China would like to align itself with.
HUMMER isn’t out of the woods yet, but it’s far from a goner – at this point, things are still looking better than the SAAB deal was just a month or two ago – and right now that deal seems to be back on track.
“I have won a lot of battles and races by not giving up,” said Team HUMMER patriarch and 22 time Baja 1000 winner Rod Hall this morning – advice we could all use as we get more news in today.