Hummer: A slice of America, purchased by China?

When people talk about a new world order they are usually referring to the New World Order (note the capitals): a supposed secret underground world government that's run by Jewish bankers and/or shape shifting alien lizards (or maybe even shape shifting Jewish alien lizard bankers). However, in this instance ACB is referring to a different an altogether new world order. Something more down to earth, but maybe slightly more insidious, than the one involving scaly space aliens and the afore mentioned Jewish bankers (ACB has never quite understood this one). This being the new world order in the making as the balance of world power/influence slowly redresses from West to East due to the rise China

While it's true that nobody is going to wake up tomorrow morning and discover PLA soldiers patrolling the streets (Not unless you're Tibetan or Hygur, that is), it is true that a lot of people woke up earlier this week and found that a large slice of American pride has (more or less) become a large slice of Chinese pride.

ACB is of course referring to the agreement between the troubled US automotive giant General Motors, and the comparatively unknown Chinese company Sichuan Tengzhong Heavy Industrial Machinery Co, for the title deeds to the infamous Hummer brand.

The Deal?

According to industry reports, US based Gm has, this week, signed a deal to transfer ownership of the Hummer brand over to Chengdu based Tengzhong Heavy Industrial Machinery Co.

The deal - worth an estimated $US150 million - will see Sichuan Tengzhong taking an 80% stake in the Hummer, with the remaining 20% being held by Chinese business person Suolang Duoji. Suolang Duoji is a significant investor in Sichuan Tengzhong.

Reports indicate that Sichuan Tengzhong is to gain ownership of the Hummer brand name, as well as its US based manufacturing plants, on the condition that it continues to manufacture in the US until at least 2011. Sichuan Tengzhongis also reported to have agreed to take on GM's relationship with all 160 of hummer's US based dealerships, and have committed to a substantial plan of reinvestment and reimagining.

Buying Respectability?

At first glance hummer may not see like a smart investment. Hummer failed to make a significant foothold outside of the US, and its domestic sales have plummeted in recent years. International sales fell by 64% during 2009, and some domestic dealerships reported sales as being down by up to 80%.

However, Hummer does have two thing going for it that Sichuan Tengzhong needs. 1) An internationally recognized brand, 2) Internationally recognized core industry experience. Both of which SichuanTengzhong lacks, indeed many Chinese companies lack.

According to some China watchers, Sichuan Tengzhong likely chose to purchase Hummer in order to it as a springboard into overseas markets. Using Hummer's well know brand on the international market rather than trying establish its own brand outside of China, and using Hummer's knowledge and experience base in order to build up it's own knowledge and experience base.

The deal is reported not to include technology or production facilities related to the US Military Humvee. Which belongs to AM General, and which would have been blocked by Washington on national security ground had it ever been on the table.

Future Plans?

At present it remains unclear exactly how Sichuan Tengzhong plans to use the hummer brand. Some reports suggest that Sichuan Tengzhong plans to retain the Hummer as a luxury Sports Utility Vehicle brand for the Chinese and international market, but to update the brand with a more fuel efficient engine and a lighter body. One report even indicated that Sichuan Tengzhong may even be intending to manufacture an electric/hybrid version of the hummer. Though Sichuan Tengzhong officials are reporting as having not elaborated on the issue when it was raised.

However, other market sources have suggested that Sichuan Tengzhong may intend to repurpose the Hummer as a workhorse vehicle. Utilizing the brand's heavy duty image and robust construction, but moving it out of the civilian MPV market and into the indistrial/comercial market where it will act as a transport and utility vehicle. According to analysts this hypothesis is leant strength by recent moves by Sichuan Tengzhong into the commercial/industrial truck market elsewhere in the world. This would also tie in with Sichuan Tengzhon's existing core market in heavy manufacturing.

Done Deal?

While the paperwork has now officially been signed, the transfer of the Hummer brand form American hands into Chinese ownership is not yet a done deal. It still has several hurdles to over come. The largest of which is likely to be regulatory approval.

On the Chinese side Sichuan Tengzhong is likely to run into difficulty with Mainland regulators over Hummer's humiliating environmental record. with some models such as the Hummer H2 managing only 17 miles per imperial gallon (US14MPG) at their peak Beijing is likely to require significant assurances from Sichuan Tengzhong that it will improve Hummer's fuel efficiency before the purchase will be approved. Beijing is also likely to be concerned about Sichuan Tengzhong's lack of experience in Hummer's core markets. Meaning that the government may quash the deal rather than risk a potential high profile failure by Sichuan Tengzhong interfering with the wider Chinese image.

On the Us side there is likely to be strong resistance form Unions, industry loby groups, and conservatives over the sale of an iconic US brand to a foreign company. Which may pressure Washington into 'discovering' regulatory issues that could prevent the sale, or into placing unacceptable conditions on the sale it in order force Sichuan Tengzhong to pull out.

Humiliation?

Although the sale of Hummer to a Chinese firm is not a significant economic losee to the US, and while a Chinese company is unlikely to do any better/worse than any other foreign or domestic company, the loss of the hummer brand ot the US is likly to prove embarrassing to the US. A loss of face and of pride during a time when the balance of world power and influence is increasingly swining away form the US and towards countries that the US has typically regarded as being lesser states in economic, industrial, comercial and political terms.

The blow is all the harder as the Hummer had come to represent the aspirational nature of US consumer culture in a way that few other brands have managed to do.

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