China regulators expected to OK Hummer deal

Shanghai, June 29 (Gasgoo.com) China's machinery manufacturer Tengzhong will start formal talks today with Chinese regulators to seek approval for its acquisition of General Motors' Hummer division. Rumors that the deal would be blocked are "pure speculation," The Wall Street Journal reported, citing one GM insider.

Sichuan Tengzhong Heavy Industrial Machinery has tentatively agreed to buy Hummer from GM but needs government approval. Last Friday, a China National Radio report stoked speculation that Chinese regulators will block the deal because of environmental concerns connected to Hummer's gas-hungry vehicles and Tengzhong's inexperience in auto-making.

But according to the people familiar with the matter, GM and Tengzhong have yet to formally present the transaction to the regulators responsible for reviewing it, and the parties negotiating the deal haven't been informed that the transaction is in trouble.

One GM executive familiar with the matter said rumors that the deal would be blocked are "not true" and should be considered "pure speculation."

China's top economic planner National Development and Reform Commission (NDRC) and the Ministry of Commerce are involved in regulating overseas investments. The commerce ministry has sounded a more positive note about the Hummer deal, saying that the bid is normal behavior for a company seeking to take advantage of the global downturn.

This week could prove pivotal in GM's attempt to shed Hummer. Tengzhong's discussions with Chinese regulators are expected to take several weeks and include presentations of plans and legal documentation.

Executives from GM and Tengzhong met last week to firm up their plans, and they believe they have a reasonable chance of getting the deal approved, even if the Chinese government harbors some concerns.