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GM has buyer for Hummer

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A Chinese heavy-equipment maker’s move to acquire General Motors Corp.'s Hummer brand has its executives and dealers excited about the possibility of overseas sales growth and more fuel-efficient models.

A day after filing for bankruptcy protection, GM said Tuesday that it had reached a preliminary agreement to sell the sport utility vehicle brand to Sichuan Tengzhong Heavy Industrial Machinery Co. Terms weren’t disclosed.

Tengzhong said it was looking to increase Hummer’s presence in the U.S. and abroad, particularly in China, now largely an untapped market for Hummer.

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The brand “is synonymous with adventure, freedom and exhilaration, and we plan to continue that heritage by investing in the business,” Yang Yi, chief executive of Tengzhong, said in a statement.

He said Tengzhong planned to invest in research and development to create new Hummer-branded products, including more fuel-efficient vehicles for the U.S. market.

Hummer executives concur that the unit, known for outsized, gas-guzzling SUVs inspired by the U.S. military’s Humvee transport, has tremendous growth potential in several countries if the brand could spend more on product development and marketing.

“We have distribution in Hummer-friendly and gas-friendly markets like the Middle East and Russia, but to be blunt the amount of marketing attention the brand got as part of a much larger company was quite small,” said James Taylor, Hummer’s CEO. “With some marketing money we can see some quick upside.”

Taylor sees “great” growth potential in China for Hummer, which in effect would become a local brand if acquired by privately owned Tengzhong.

But with oil prices once again surging and stricter fuel efficiency and environmental standards planned in the United States, Taylor said, Tengzhong would have to be prepared to spend on developing new Hummer vehicles.

“We need to ramp up a product development program right way. We need smaller and more fuel-efficient powertrains and have to get mileage into at least the 20s per gallon from the teens,” Taylor said.

How much money the Chinese are willing to spend on product development and where Hummer vehicles would be manufactured will be among the topics discussed when Hummer officials meet with Tengzhong executives this week, he said.

Tengzhong, based in the province of Sichuan, said it planned to retain Hummer’s senior management and keep in place the auto company’s existing dealer agreements. It also signaled that it wanted to reach a long-term accord for GM to continue to supply and assemble Hummers. GM said such a contract would secure more than 3,000 U.S. jobs, but cautioned that the deal -- which the companies said they expected to complete in the third quarter -- remained subject to final negotiations.

Hummer dealers also were upbeat about Tengzhong’s bid.

Chris Leggio, vice president of Mark Christopher Hummer in Ontario, called news of the deal a relief.

“This is someone who will be committed to the brand and who wants to bring out more models -- vehicles that will be fuel-efficient and inviting to the public,” Leggio said. “This is a very iconic brand, known worldwide, but we need new models and fresh ideas.”

There’s no reason Hummer can’t thrive, said Bob Martin, a senior consultant at CarLab, a consulting firm in Orange.

“The overseas demand hadn’t been tapped to its fullest, and that’s a key to the total global volume potential to make the numbers work,” he said.

Closer to home, Martin said, the company needs to stop positioning its vehicles as something a “cool soccer mom” would want to be seen in dropping off the kids off at school.

Instead, he said, the Hummer should be aimed at those who “need or want the most capable off-road vehicles in the world. There are more of those people than you might suspect. These core owners remain utterly in love with the brand and the product, but haven’t had a reason to repurchase since GM didn’t do anything to keep the product fresh.”

The Hummer brand, once a cash cow for GM, came to represent a symbol of the company’s misdirected priorities and lack of balance as gasoline prices spiked at more than $4 a gallon nationwide a year ago and activists vandalized Hummer dealerships.

GM has been trying to sell the Hummer brand for a year. It disclosed this spring that it was in negotiations with three prospective buyers.

“I’m confident that Hummer will thrive globally under its new ownership,” said Troy Clarke, GM’s head of North American operations.

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jerry.hirsch@latimes.com

ken.bensinger@latimes.com


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