China regulators may block Hummer sale

General Motors Corp., the largest U.S. carmaker in bankruptcy, may have its agreement to sell the unprofitable Hummer sport-utility vehicle brand blocked by Chinese regulators, threatening 3,000 U.S. jobs.

Sichuan Tengzhong Heavy Industrial Machinery Co.'s bid for Hummer runs counter to China's attempts to develop a globally competitive auto industry by focusing on fuel-efficient vehicles, according to analysts. The government also wants to pare the nation's more than 100 automakers to ease competition.

"A new entrant in the car industry is not something they're looking to see," said Chip Chaikin, who helps overseas $800 million as managing director of Shanghai-based Blue Point Capital Partners Asia. "It's pretty unlikely" the deal will go through.

Tengzhong also needs to persuade at least two Chinese government agencies that it can turn Hummer into a profitable company to get clearance for the deal, said Zhang Xin, an analyst with Guotai Junan Securities in Beijing. Hummer's U.S. sales are plunging as higher gasoline prices and rising job concerns hammer demand for its gas-guzzling SUVs.

"There are many uncertainties about the deal and one of them is whether Chinese authorities will approve it," said Zhang. "The big issue for Tengzhong is how long it will take to make a profit from the investment."

Hummer's Value

Hummer is worth an estimated $500 million, Detroit-based GM has said in bankruptcy documents. The brand is one of four in the U.S. the carmaker wants to offload to exit bankruptcy as a leaner, more profitable company.

GM Chief Financial Officer Ray Young said yesterday that he doesn't expect regulators to block the deal and that Tengzhong is "very excited" about it.

"Some people may have views and speculation but the Chinese government has a process that we respect," said Tim Payne, a spokesman for Chengdu, Sichuan province-based Tengzhong. "We have only just signed an MOU but as we develop our proposals with GM and Hummer we will continue to work with the appropriate authorities."

"It is a business decision," said Chen Rongkai, a media officer at China's Ministry of Commerce. He declined to comment further.

Approval Unlikely

China is unlikely to approve the Hummer deal, Shanghai Securities News reported yesterday, without saying where it got the information. The government is encouraging companies to buy overseas partsmakers rather than automakers, added the newspaper, which is affiliated with state-controlled Xinhua News Agency.

The commerce ministry vets all overseas investments worth more than $100 million. Smaller deals go through local regulators. The State Administration of Foreign Exchange also looks at all overseas investments by Chinese companies.

GM has won court approval to sell assets as soon as next month after collapsing under $172.8 billion in debt and failing to adapt to consumer demands for cars that use less fuel. Sales of Hummer SUVs, which start at about $31,000 for the H3, fell 51 percent in 2008 and 67 percent this year through April.