Fritz Henderson: We Depend on China!

Fritz Henderson, who took the place of Wagner to become the CEO of General Motors (GM) in April 2009, finally came to visit China to give out his opinions in the Hummer acquisition and importance of the Chinese market.

On October 13, GM CEO Fritz Henderson arrived in Shanghai to start his first visit in China after he took his post. When interviewed by the Shanghai media, Henderson gave out his own opinions about selling Hummer to China-based Sichuan Tengzhong, saying that selling Hummer to Tengzhong was determined by bidding. GM was satisfied with the price and would support Tengzhong in the adjustment of the power system of Hummer. He also believed that such a deal will be undoubtedly approved by the Chinese government. He added that GM will introduce more new vehicles into the Chinese market at a faster pace.

Bleak Outlook for Hummer

According to the agreement, Tengzhong acquired the ownership of Hummers brand, trademark and name. Simultaneously it got the using rights of the patent to produce Hummer vehicles. Then the buyer should take over the distribution agreements of Hummer. Previously, GM priced Hummer at 500 million US dollars. Before the confirmation of this deal, it was reported that the final offering was 150 million US dollars. Henderson said: “Sorry that I can not tell the exact price before the approval of this deal.”

The final agreement enabled the both sides to advance to the relevant examination and approval process. Henderson said that the deal will take effect after the accomplishment of the general transaction conditions and the approvals of the Chinese and US government departments. He denied that he had the plan to talk about this matter with the Chinese government during his visit.

The analysts in China are worried about the operation of Hummer in the future due to the unknown direction of the intellectual property right and the allocation of the research and development team. Wang Liusheng, an expert in vehicle, doubted whether Tengzhong can afford the 150 million US dollars and whether its operating ability is OK.

It is known that Tengzhong, with the registered capital of only 300 million yuan (USD 42.93 million), is specialized in producing oil devices and road construction machines. In 2008 its output value was 1.57 billion yuan (USD 229.91 million) and the amount of submitted tax reached 20 million yuan. According to the agreement between GM and Tengzhong, GM is entrusted to provide Hummer with the assembly of vehicles, key components and related business service during a contracted period. Two US-based assembly factories under GM will continue to play their roles of sub-contractors for Hummer till June 2012, after which they have the right to decide whether to extend the contract for another year or not. The deal can retain 3,000 positions of manufacturing and selling Hummer vehicles in the USA, but it will keep Hummer from being made in China for a while. Henderson didnt talk about the plan of when to have the Hummer vehicles completely manufactured in China, only saying that GM will support Tengzhong in integrating Hummers businesses in the USA and the improvement of the Hummer vehicles.