Chinese gov't may Okay Hummer purchase

Shanghai, June 10 (Gasgoo.com) China's private company Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd. has already signed a memo of understanding with General Motors to buy the U.S automaker's Hummer brand, including its technologies, R&D, production line and sales network, but excluding the military Hummer.

Even if the two companies have clinched their final deal, it will need the seal of approval from China's regulators. Will the Chinese government give the green light to this sensational, controversial deal? An industry analyst said it is possible for the Ministry of Commerce to approve the Hummer purchase by Tengzhong.

First, this is an independent purchase by a private Chinese company, not an acquisition by a state-owned company. As long as Tengzhong can raise enough fund or use its own money to buy GM's Hummer brand in the market way and will take the related risks, why bother to block it?

Second, the Chinese government will not appear too conservative in global mergers and acquisitions when the U.S. government is not opposed to the Hummer sale to China. If this deal is "killed" by China's regulatory bodies, it may be a big embarrassment to the two companies and the Obama government.

Third, under the deal, Tengzhong will be allowed to use the brand name, design and trademark of Hummer in its products, which means the Chinese machinery manufacturer can produce Hummer-brand dump trucks and industrial machinery as well as Hummer vehicles in China to boost Tengzhong's market growth.

Brand expansion has a huge market, as exemplified by Chrysler's Jeep brand, a renowned household name in American auto culture. The Jeep brand has expanded into other sectors, such as garments and ornaments. If Tengzhong has bought the Hummer brand, the company can expand its use in the same way.

Since the beginning of this year, the Chinese government has urged its enterprises to "go global" and has eased its regulations on overseas investment management. The mergers and acquisitions by private companies should be encouraged as well. The government will make a judicious decision.