Sichuan Auto said in talks to buy GM's Hummer

Sichuan Auto Industry Group Co., one of the smallest carmakers in China, is in talks to buy General Motors Corp.’s Hummer sport-utility vehicle unit, three people familiar with the matter said.

Sichuan Auto, which has about 1 billion yuan ($146 million) in assets according to its website, may pay up to $500 million for the unit, the people said. The company plans to get financing from state-owned banks, the people said. Other companies may also bid for Hummer, one of the people said.

GM, whose Hummer sales plunged 60 percent in January, must raise cash and cut its debt to receive a $13.4 billion emergency aid package from the U.S. government. Sichuan Auto and other Chinese carmakers may use the economic crisis to buy car brands and technology to help expand beyond the domestic market.

Closely held Sichuan isn’t among the 79 major automakers in China ranked by assets, according to the China Association of Automobile Manufacturers. Zhou Liya, a sales official with Sichuan Auto, said he is not aware of their bidding for GM’s Hummer.

"Meetings and discussions with potential investors are ongoing," said Henry Wong, Shanghai-based spokesman for GM, wrote in an e-mail. "We will not discuss whom the potential investors are."

The sale would help GM keep loans from the U.S. government as it approaches a Feb. 17 deadline to show its future viability to the U.S. Treasury. If the biggest U.S. automaker can’t prove it’s able to return to profit, it could be told to give up the loans or use the cash for a government-funded bankruptcy.

Selling Assets

GM had sought to raise $4 billion by shedding assets, a goal that the automaker said in December had been hampered by the September bankruptcy of Lehman Brothers Holdings Inc., which deepened the global credit crunch.

Chief Executive Officer Rick Wagoner said GM was considering options for Hummer, including a sale, at the June 3 shareholders meeting as record fuel prices prompted the automaker to shift its focus to more fuel-efficient cars away from light trucks.

Sichuan Auto has the capacity to make 5,000 buses, 30,000 passenger vehicles and 50,000 engines a year, according to its Web site. It was set up in May 1994 and taken over in August 2006 by Fulin Group, a real estate developer that is also involved in transportation and industry business.

The company sells Yema brand sport-utility vehicles, based on MG Rover Group Ltd.’s technology and equipped with Mitsubishi Motors Corp. engines. It also sells Yema brand buses in China.

China’s Geely Automobile Holdings Ltd., a privately run automaker, has held preliminary talks on buying Volvo Car unit from Ford Motor Co., three people familiar with the matter said early February.