Sunday, June 7, 2009

Reports question Chinese Hummer acquisition

SHANGHAI (AP) - General Motors Corp.'s planned sale of its Hummer brand to a little-known Chinese truck maker could be blocked by regulators who have not approved the deal and are questioning its wisdom.

Sichuan Tengzhong Heavy Industrial Machinery Co. and GM have given no financial details about the planned purchase of the American maker of gas-guzzling, military-style SUVs.

However, any such deal would require Chinese Commerce Ministry approval at the provincial level at least. Reports in the Shanghai Securities News and other state-run newspapers Friday said Sichuan Tengzhong had not yet obtained such an approval. They also raised questions over whether the deal will be allowed to go through, with one report likening Tengzhong's plan to acquire Hummer to a «snake trying to swallow an elephant.

The surprise announcement of the acquisition by Sichuan Tengzhong, a maker of heavy industrial vehicles such as cement mixers, has raised questions about the privately owned company, which has disclosed scant information about its ownership or finances.

Reports in the financial magazine Caijing and state-run newspapers said a mining tycoon, Suolang Duoji, who is also known by the Chinese name Li Yan, was behind the deal. Suolang Duoji indirectly owns a big stake in Sichuan Tengzhong through an investment company called Sichuan Huatong Investment Holding Co., the reports said.
He also is the controlling shareholder and chairman of Lumena Resources Corp., a mining company that is preparing to list shares on the Hong Kong Stock Exchange.

Both Tengzhong and Lumena are based in China's mountainous southwest. However, in the prospectus for Lumena's IPO, Suolang Duoji lists his residential address as a luxury serviced apartment in Hong Kong. Staff at Tengzhong's public relations firm refused comment. Staff at Tengzhong's headquarters in Chengdu, Sichuan, referred inquiries to the PR agency.

A woman who said she was a human resources manager at Sichuan Huatong refused to transfer calls to any other numbers, saying company policy was to keep such numbers secret.

Lumena is the world's second largest producer of thenardite, a form of sodium sulfate that is used to make detergents and in textile and glass production. The company prospectus reports 1.9 billion yuan ($278.6 million) in assets and net profit of 442.1 million yuan ($65 million) in 2008. The exact relationship between Lumena and Tengzhong is unclear, as is Tengzhong's own financial status.

Tengzhong is likely benefitting from heavy stimulus spending on construction projects and from rebuilding from last year's earthquake in Sichuan, given its specialization in construction equipment and heavy trucks.

The company earlier said it broke ground on a 3.5 billion yuan ($500 million) factory to make oil field equipment.
Tengzhong's CEO, Yang Yi, has said the company will keep Hummer's headquarters and operations in the U.S., while investing more in research and development of more fuel-efficient vehicles: the Hummer now gets 15 mpg.