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Analysts frown over Chinese buyer's Hummer deal
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The tentative deal for a little-known Chinese company to buy Hummer, a gas-guzzling and road-hogging brand under the General Motors, triggered doubts from Chinese analysts.

Sichuan Tengzhong Heavy Industrial Machinery Co., which said Wednesday that it was buying Hummer, has no experience in passenger-vehicle market and mainly produces industrial machinery.

"I had never heard of the company and was surprised at the news," said Yang Cheng, general manager of Sanhe Hummer Sales Center, one of the two branches that sold Hummer in Chengdu, capital of Sichuan Province.

A veteran in the automobile industry, Yang said he was not optimistic about the deal.

"Sales of some brands, including Hummer, had been dropping since the General Motors reported financial crisis in 2005. Though new high-energy efficiency models had been developed, they were not put into market possibly because of gloomy market prospect," Yang told Xinhua Thursday.

"To rejuvenate the brand, the buyer will have to input a lot of money in research, development and marketing," Yang said.

Zuo Xiaolei, an economist with China Galaxy Securities, said the bankruptcy of the General Motors was related with its strategy that failed to turn most of its car models energy-efficient.

"Producing gas-guzzling brands is against the current trend toward energy-saving and emission-reduction," Zuo told Xinhua Saturday. "Meanwhile, the company has no experience in producing passenger vehicles, adding difficulties for the company to manage the brand."

Wang Yukun, a researcher with the Yangtze River Delta Research Institute under Beijing-based Tsinghua University, said it would be hard for the buyer to "digest" Hummer.

"Tengzhong plans to maintain the current management team for Hummer and develop more energy-efficient models, but it is just their fantasies. If the current team could prevent the brand from slumping in any way, they would have done so before," Wang told Xinhua.

"Some companies put enterprise size and brand fame as priorities and took acquisition as a shortcut to get them," said Wang. "For example, Lenovo purchased IBM's PC business, but it still reports losses in the business now."

"It's difficult for a company to digest something dumped by others," Wang said.

The transaction is expected to close in the third quarter of this year and is subject to closing conditions and regulatory approvals, said a statement from Tengzhong.

Tengzhong can use the brand and will maintain the staff of 3,000 employees, the statement said.

Relative financial content on the deal will not be publicized at present, the statement said.

A poll conducted among 56,000 respondents by China's leading Internet portal Sina.com showed 49.4 percent were not optimistic about the purchase, 40.2 percent supported the purchase and 1.4 percent believed it was hard to say.

"Chinese companies should not buy things already eliminated by others in market and be rational in acquiring overseas brands," said a netizen Tian Dezheng in a comment.

(Xinhua News Agency June 6, 2009)

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