China Pollution Concerns Dash Hummer Deal

Feb. 25, 2010
Government rejected deal as it wants economical and environmentally-friendly vehicles, analysts say

China's environmental concerns have dashed Tengzhong's dream of buying the iconic Hummer brand from General Motors.

Sichuan Tengzhong Heavy Industrial Machinery, based in southwest China, raised eyebrows when it announced in June last year that it would buy General Motors' world-famous brand of gas-guzzling sport utility vehicles.

Nearly nine months later, when Tengzhong announced on Feb. 24 it had withdrawn its offer to acquire Hummer after it failed to get approval from Chinese authorities, analysts expressed little surprise.

"Hummer is a fuel-gobbling vehicle," said Liu Feng, a Beijing-based auto analyst with Southwest Securities. "The government rejected the deal to indicate a direction -- China wants economical and environmentally-friendly vehicles, rather than ones with large emissions and high-fuel consumption."

Hummer, modelled after the U.S. military's Humvee, has become a global symbol of wasteful pollution, and China is already suffering from serious environmental degradation resulting from decades of breakneck economic growth.

Chinese commerce ministry spokesman Yao Jian hinted that concerns about the image the deal would present of Beijing's environmental priorities had led to its demise. "China's overall policy is certainly similar to the global trend -- we'll further encourage a sustainable economic development model and a green economy," Yao said.

Beijing has ambitious plans to build a world-class automotive industry by 2020, and as such tightly controls all activity in the sector.

But from the start, analysts had doubted that the privately-owned Tengzhong, which until now had made machines to build roads and bridges, or used in the energy industry, had enough expertise in global trade or auto production.

"The government has shown it doesn't approve of companies with no experience in car production or operations to start a business in the sector," said Liu. Commerce ministry spokesman Yao hinted the experience issue had been a factor, saying Tengzhong had never offered government regulators a "complete acquisition plan" and should have consulted attorneys and accountants.

Copyright Agence France-Presse, 2010

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