Hummer-Tengzhong Deal Still Raises Eyebrows

The recently announced definitive agreement between American manufacturer GM and non-automotive Chinese company Tengzhong has reignited the dispute over whether this is the best solution possible for the American brand. As in the past, the general consensus is that Tengzhong may be in over its head.

"The entire deal is frankly more than a little puzzling, given what it entails exactly," Aaron Bragman, analyst for IHS Global Insight said in a letter to clients quoted by "For the rumured sum of US$150m, Sichuan Tengzhong is taking a back door route to becoming the first Chinese automaker present in the United States."

As part of the deal, GM will continue to supply components and business services to Hummer, meaning it will continue to make Hummers, under contract, for the next two years. After that, it is all up to Tengzhong to both make the unit profitable and its cars more appealing to the increasing environmental-conscious consumers.

"But Sichuan Tengzhong is not an automaker. The only thing that the company brings to the party is money, and although money may help Hummer, it will not change the brand's situation anytime soon," Bragman added.

"The company now has basically two years to find a way to engineer, build, and deliver its own vehicles, or to work out a deal with another automaker to build and deliver some trucks."

The analyst's position is somehow the same one adopted by the Chinese regulators, who are still to give their final decision on the deal. Their concerns are fueled by both the company's lack of automotive experience and a possible future environmental approach for Hummer.

As Bragman says, Tengzhong has nearly no environmental credentials and a line of fuel-efficient Hummers is just about the only way to get the brand back on track. He believes such an experience can be accumulated, but in more than two years, the amount of time Tengzhong has to come up with a solution.
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About the author: Daniel Patrascu
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Daniel loves writing (or so he claims), and he uses this skill to offer readers a "behind the scenes" look at the automotive industry. He also enjoys talking about space exploration and robots, because in his view the only way forward for humanity is away from this planet, in metal bodies.
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