China Business

China’s Hummer "Purchase", Just as We Predicted

China form and Template Contract

Way back in September, 2009, in Our First China Hummer Post. Our Silence Said It All, we emphatically stated that the Hummer deal would never go through:

Which brings me to Hummer. I can see a Chery buying Volvo to increase company prestige and to improve their in-house technology. I just never believed a Chinese purchase of Hummer would go through because I never thought it made sense. I did not think it made sense because I could see no logical reason for a Chinese company to buy Hummer with the intention of keeping its production in the United States, especially when the Chinese company is not in the auto business. I therefore never bothered to write about it until now because I did not see it as indicative of anything of much import.

I just do not see it. Do you?

I then talked about the sorts of Chinese outbound investments our China lawyers see that actually make sense:

Chinese companies looking to buy American companies are usually looking for a valuable technology or commodity or, to a much lesser extent, a strong brand name. If the company you are pitching has neither, the chances of a Chinese company buying it are really slim. People have told me that Chinese companies “have to be” interested in companies with really good marketing people. They tell me Chinese companies are terrible at marketing and so they obviously will be buying American companies that are good at it. That’s true in theory, false in reality.

Goodby Hummer and good riddance.

UPDATE: ChinaBizGov Blog did a post, Hummer rejection: It’s all right there in the policy, explaining how the Chinese government rejecting Sichuan Tengzhong’s proposed purchase of Hummer should have been no surprise. The post explains what is required for Chinese companies to secure government approval to get their money out of China for international business transactions. FURTHER UPDATE: Paul Maidment over at Forbes Magazine has written on the failed sale, in Hummer’s Doomed Sale. Maidment cites our blog (this post) and agrees this deal never made economic sense and that helped doom it.

7 responses to “China’s Hummer "Purchase", Just as We Predicted”

  1. I’m sorry to see the Hummer deal fall through for one reason and one reason only: a friend working as a sub-editor at one of the English-language rags in Beijing had promised that he would work in the front-page headline “China Gets A Hummer” after it went through.

  2. I think it is too bad for Shreveport. Thousands of people
    Will lose their jobs after GM shuts down its plant there.
    I don’t know if this has something to do with the d-llama’s
    Visit in US. Last week, He met with the President, on Monday he was interviewed on CNN, then yesterday, the deal was officially killed.
    PS I don’t agree that this Hummer deal makes no sense.
    Part of the deal was that Sichuan Tengzhong would be a
    long term auto part supplier to GM China so Tengzhong might have gotten a lot back from this.

  3. I seriously doubt that this has anything to do with the D- Llama’s visit, since there are a thousand other commercial deals in the pipe that weren’t affected.
    Besides, either the deal was something that the Chinese government thought was in their interests or it wasn’t. If it was, then it would have gone ahead notwithstanding the D- Llama’s visit. If it wasn’t then the D- Llama’s visit didn’t make any difference.

  4. I don’t think it had anything to do with the D-Llama visit. The Chinese are more astute than that. The deal does make sense if they had long term ambitions and were willing to invest in Hummer to make it happen. But that’s a real long shot since it will take real vision, wisdom, and serious commitment and a ballsy executive. In the risk adverse and preserve-face-at-any-cost culture of China, it would take a special person to take on that job. It’s a gamble with the odds stacked against TZ.
    Maybe they just timed it to coincide with the D-Llama visit to score some points with Central Gov, who knows. But if this were the Cherry/Volvo deal, I don’t believe they would throw out the deal to protest it.

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