China Ink

Road to nowhere

General Motors announced last week that it had dropped efforts to sell its Hummer operations to Sichuan Tengzhong Heavy Industrial Machinery, after nearly nine months of talks.

Road to nowhere

Why did the deal fall through?

It was the timing – according to Tengzhong – which has complained that it couldn’t get government approvals “within the proposed deal timeframe”.

But spokesmen from the Ministry of Commerce say that it was more about Tengzhong failing to provide a sound purchase plan. Probably a bigger factor: the proposal also ran counter to Beijing’s environmental policies, as well as its plans for consolidation of the crowded auto industry. “For anyone who is concerned about the environment and the development of the auto industry, the death of Tengzhong’s Hummer bid is only a good thing,” Xinhua reported.

The New York Times felt that the breakdown was probably “good news” – especially if it signified that the government was getting more serious about the environment. It suggests that Beijing may be worried about China’s image as the most polluting nation on the planet.

Perhaps Tengzhong will look back on events with relief rather than regret. Sales of Hummers peaked at 71,524 in 2006 but had fallen to a little over 9,000 vehicles last year. In January this year, just 265 Hummers were sold in America, AP reported.

So someone forgot to tick the right boxes…

The deal ended in confusion. The Ministry of Commerce told the China Daily that it had never even received the necessary documents to review the purchase, something Tengzhong has denied. Caixin Online thinks it understands what might have happened. According to sources, Tengzhong submitted an application to the NDRC last year, but was informed that the deal was not within the commission’s remit. It may then have become difficult to find a government department ready to accept responsibility for the decision.

It seems hard to believe that Tengzhong would spend months working on a deal but then forget to make a formal application, writes Greg Anderson, an auto industry specialist at ChinaBizGov. His guess is that Tengzhong officials were camped out in Beijing for months trying to get official sign-off. But there wasn’t a clear set of criteria on how this would happen, so the discussions never formally progressed.

And now Tengzhong is in the firing line?

Some of the Chinese press has been scathing about the Sichuan firm. The China Times suspects that the past seven months have been more about Tenzhong raising its profile than making a serious bid.

Xinhua puts the boot in harder, slamming the Chengdu-based firm as “worthy of contempt”. This was a deal that should never have been contemplated, especially as there was no plan to produce the Hummer in China or to enable technology transfer from the US. It was more a case of “simply throwing bank loans to the United States.”

It was pretty clear that the Ministry of Commerce was not going to bless the transaction, said the New York Times.

That made the Chinese banks very reluctant to lend money to Tengzhong.

Although 3,000 jobs will be lost in the US, few newspapers were mourning the Hummer brand’s demise. Unless a last minute buyer can be found, GM says the business will close. But it’s hard to weep for a vehicle “which gets roughly 10 miles per gallon,” noted the Los Angeles Times.

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