I had seen the Hummer news, but it was my sister's email that got me really interested in the deal. Even though it is not a done one yet (it still awaits government approval, and the government doesn't sound happy about it), people in China seem to be very excited. One reason is that the Sichuan enterprise named Tengzhong Heavy Industrial Machinery Co. is an "obscure China firm," as WSJ calls it (I couldn't read the complete article because I'm not a subscriber). Given the competitive attitude between Chinese and Americans, an obscure China firm dares to acquire a big American (though bankrupt) brand, it is kind of newsworthy. But what more is in it beyond emotion? Here are some things I found on the Chinese internet:
Where did Tengzhong get the money to purchase Hummer? China.com says part of it was from Morgan Stanley. Behind Tengzhong is the 12-year-old Huatong Investment Ltd., China.com says. In early 2008 Morgan Stanley helped Huatong to finance its IPO by purchasing under 20% of its stock, paying US$80 million and issuing $200 million in bonds; that's a total of $280 million.
The report seems to imply that the provincial government of Sichuan supports the deal, but not the central government: "A relevant government official disclosed that, a Sichuan province leader once orally mentioned the Hummer acquisition business to a relevant committee of the Party central, but got a rejection on the spot." The reasons? "The government encourages our enterprises to acquire or merge with foreign enterprises that make parts, but not enterprises that manufacture entire cars. This is based on the consideration of cost and future operation issues."
According to the report, Tengzhong will spend $1 billion on this project, of which 0.55 billion goes to Hummer, and the remaining 0.45 billion will be used in building a new assembly line in Chengdu.
Reactions on the internet are varied. Here are a few views:
From cd.qq.com: For a long time, China's automobile industry has been under constraints of Western countries' big brands. Now Tengzgong dares to acquire a big brand, no matter what the result, it shows private enterprises
Sina.com reruns a Chinanews.com report that says the registered capital of Tengzhong is only 300 million RMB (about US$ 44 million), and some people suspect this whole thing is hype.
A skeptical report from xinhua.net raises the question whether this is a two-man show played by Tengzhong and Hummer.
Nanfang Daily reports that a Sina.com poll shows over 50% out of 70,000 netizens think this a lose-money deal. Another report calls it "a snake swallowing an elephant."