CHINESE BID TO BUY HUMMER AWAITS GOVERNMENT

UNCLAS BEIJING 001476 SENSITIVE SIPDIS STATE FOR EAP/CM SFLATT/JHABJAN STATE PASS USTR FOR STRATFORD, WINTER, MCCARTIN, READE, VENKATARAMAN, KEMP, MILLER, MALMROSE DOC FOR MELCHER, SAUNDERS; LORENTZEN AND SHOWERS (5130); HEIZNEN(6510) E.O. 12958: N/A TAGS: ECON EINV SENV CH SUBJECT: CHINESE BID TO BUY HUMMER AWAITS GOVERNMENT APPROVAL, DEEMED UNLIKELY BY SOME This cable is Sensitive but Unclassified (SBU) and for official use only. Not for transmission outside USG channels. ¶1. (SBU) SUMMARY. A Chinese industrial machinery company has signed a memorandum of understanding (MOU) with General Motors (GM) to purchase its civilian Hummer brand. A GM China official (protect) confirmed that Sichuan Tengzhong Heavy Industrial Machinery does not have experience in the automobile market, and even may not have initially understood the civilian Hummer line. One industry insider speculated Tengzhong may be interested in Hummer engine technology. The acquisition still requires government approval, and officials indicated the deal did not have Beijing's support. End Summary. Sichuan Heavy Machinery Company -------------- ¶2. (SBU) According to Tengzhong's website, heavy machinery equipment manufacturer is one of China's largest non-state- owned engineering companies. The company was established in 1965 as the state-owned Sichuan Changdian Electric Company, and was purchased by the current owners in 2005. Since then, it has grown rapidly by acquiring other previously state-owned enterprises. ¶3. (SBU) According to GM China, Sichuan Tengzhong Heavy Industrial Machinery Company is not a car company. In fact, they were extremely unfamiliar with the Hummer initially, and GM had to clarify that the military Hummer and the civilian Hummer are entirely different vehicles. One industry analyst speculated that given Chinese auto companies' relative weakness in engine technology, Tengzhong is interested in acquiring Hummer's advanced engine technology. GM announced that they had chosen to sell to Tengzhong because it has the money to commit to long-term growth and plans to keep operations in the United States. Not a Done Deal -------------- ¶4. (SBU) Although an MOU has been signed by the two companies, the deal still needs the approval of the Chinese government. The National Development and Reform Commission (NDRC) must approve all large-scale overseas acquisitions by both state- owned enterprises (SOEs) and private companies. According to an NDRC official, the Commission's Department of Industry has not yet received an application from Tengzhong to buy Hummer. The GM China official told EconOff that GM is going to formally brief the Chinese government on the sale conditions in the coming weeks. ¶5. (SBU) NDRC officials in conversations with the Embassy cited several concerns about the deal. First, Tengzhong has no experience running a car company, and the plan is to keep the brand and management intact. Second, Hummers are not energy efficient, which runs counter to China's current push for energy-efficiency in the auto industry. One official said the proposed acquisition "may be a no-result deal." The GM China representative confirmed this view. PICCUTA