Hummer buyer eyes fuel-efficient SUVs, US sales

Sichuan Tengzhong Heavy Industrial Machinery Co., the Chinese company buying Hummer from General Motors Corp., is targeting U.S. sales and a more fuel-efficient model to revive the money-losing sport-utility vehicle brand.

"We need to be an investor who has certain amount of patience,” Chief Executive Officer Yang Yi said in an interview yesterday in Beijing. Profit will "depend on how much the vehicle can penetrate the U.S. market and on how wide the reach will be in the global market.”

Hummer's U.S. sales plunged 67 percent this year through April as higher gasoline prices and rising job concerns damp demand for SUVs that get about 14 miles to the gallon in city driving. GM is offloading the brand as part of plans to exit bankruptcy as a leaner and more profitable company.

"Tengzhong's chances of making a profit on Hummer are really low given the demand,” said Yu Bing, an analyst at Pingan Securities Co. "Nobody would put a good company on sale -- Chinese buyers should be really careful.”

Hummer plans to develop an H4 model that uses 9 liters of gasoline per 100 kilometers (26 miles to the gallon), Yang said. He declined to say when the new model will go on sale.

U.S. sales of Hummer SUVs, which start at about $31,000 for the H3, fell 51 percent in 2008. Yang declined to comment on Tengzhong's financial and sales targets.

The company said on June 2 that it had agreed to buy Hummer from GM in a deal that would save more than 3,000 U.S. jobs. Still, regulators are unlikely to approve the plan as China's government wants companies to buy overseas partsmakers instead of automakers, state-owned Shanghai Securities News reported on June 4, without saying where it got the information.

Regulatory Approval

"It's up to the government” Yang said when asked if the deal would be approved. The automaker is "communicating” with regulators, he added, without elaboration.

The Ministry of Commerce, which has to approve all overseas deals by Chinese companies costing more than $100 million, is yet to receive an application from Tengzhong, Yao Jian, a ministry spokesman, told reporters in Beijing today.