VZCZCXRO9864
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #1476 1542324
ZNR UUUUU ZZH
P 032324Z JUN 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 4268
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

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