Tengzhong’s Hummer Deal Is More like Hype

　　According to Xinhua News Agency, General Motors Corp. announced on February 25 that Sichuan Tengzhong's acquisition deal failed. GM's headquarters in Detroit said that Tengzhong failed to complete the deal in accordance with the schedule. Since the deal resulted in failure, GM will gradually shut down the operation of Hummer.

　　GM and Tengzhong signed a definitive agreement on the sales of Hummer on October 9 last year. The two sides agreed to complete the transaction deal by January 31 in 2010. Then the completion of transactions was delayed to the end of January in 2010.

　　Tengzhong's acquisition drama last for almost nine months and ended in failure.

　　■Interpretation

　　According to the Star Daily, the termination of acquisition was a decision made by the enterprise. Tengzhong does not have the qualification.

　　At the Detroit Auto Show held earlier this year, Kevin E. Wale, the President of General Motors (China) said that the biggest obstacle for the deal was that Tengzhong did not have the qualification of automobile production. Only by solving the problem first can the acquisition deal carry on.

　　Tengzhong mainly produces road-building machinery such as mixer and does not have the qualification of automobile production. How could it take over a troubled foreign auto brand and enter the high-end SUV market? That's not easy.

　　Acquisition is more like hype.

　　Tengzhong's bid for Hummer once shocked the whole world, attracting millions of people's eyeballs. However, after the cool-headed analysis, we found that Tengzhong's bid was not like a normal business acquisition, but rather hype.

　　According to the Interim Management Measures of Offshore Investment Projects, the state implements approval management in terms of overseas investment resource development projects and programs requiring large quantity of foreign exchange. Before carrying out negotiations with foreign countries, Chinese enterprises should send reports to the National Development and Reform Commission and get confirmation.

　　After announcing the acquisition bid for Hummer in June 2009, Tengzhong reported acquisition affairs to the authorities.

　　Tengzhong has not officially reported the acquisition deal.

　　The National Development and Reform Commission believed that the acquisition of brand belonged to trade services and the Commission was not responsible for the deal. Therefore the application was rejected. Then Tengzhong reported the acquisition plan to the Ministry of Commerce. However, The Ministry of Commerce thought Tengzhong had not made clear about what it wanted to take over. Patent or technology? Then the request was rejected.

　　Ma Guangyuan, a lawyer who has been engaged in cross-border mergers and acquisitions, said that according to the final agreement Tengzhong did not have clear notions about what it wanted to acquire. How could the Ministry of Commerce approve the deal?

　　Termination of acquisition is corporation's decision.

　　Tengzhong said in the statement released on February 25 that it failed to obtain the approval from regulatory bodies and deal came to an end.

　　Yao Jian, the spokesman of the Ministry of Commerce, pointed out that so far regulatory institutions had not received Tengzhong's complete plan for taking over Hummer. The termination of acquisition is a choice made by the enterprise itself.

　　■ Analysis

　　The failure of acquisition is not a bad thing.

　　Some analysts believed that Tengzhong was not clear about a number of affairs and it was aware of the difficulty of approval. Therefore Tengzhong did not offer reports to regulatory departments on time.

　　Since the news of acquisition came out early June last year, Tengzhong changed the arguments several times. At first, Tengzhong claimed it would take over Hummer's assets and plant and invested billions of dollars to produce eco-friendly Hummer in China. Then Tengzhong pointed out it had obtained the support from local governments. Later Tengzhong said it would acquire Hummer's brand rather than assets and shares.

　　We all know that Hummer is a “gas guzzlers." Acquisition of such a large-displacement model does not comply with national strategy of developing and selling energy-saving small cars. The deal contradicted with the trend of environmental protection.

　　With the failure of acquisition deal General Motors said it would shut down Hummer. It appears that the collapse of acquisition deal is a good thing for those people who care about environmental protection and development of automotive industry. (Translator: Qinghua/Hanxin)

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　　http://auto.sohu.com/20100226/n270438370.shtml