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  • China Humming A Sweet Tune

    A brand new Hummer is poised for sale at a GM and Hummer dealership in Denver on March 30, 2009.

    As rumored for several weeks, a Chinese company is buying at least one piece of General Motors. GM will sell its Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery for an as yet undisclosed sum, probably $200–$300 million.

    There are multiple dimensions to the proposed acquisition, covering both commerce and national security. One immediate response might be along the lines of “America just shouldn’t sell a brand name like Hummer to the Chinese.” This would be misguided interference in the free market and, not coincidentally, something we correctly accuse China of doing.

    Another quick thought might be to wonder whether there is advanced technology involved. After all, Hummer evolved from military vehicles. With few details of the deal available, it is not clear what, if any, production facilities or technology are being transferred. It may be that only brand and marketing assets are involved.

    If technology is being transferred, the U.S. has a system of reviewing foreign investment to ensure important technology is protected – the Committee on Foreign Investment in the United States, or CFIUS. A situation like this cries out for CFIUS evaluation, so that facts can be laid out publically and guesswork is unnecessary. This has less to do with involvement of a Chinese company than with Hummer’s military roots.

    The purely commercial aspect of the deal is murky which, unfortunately, is standard for Chinese investment overseas.

    Sichuan Tengzhong’s interest in Hummer is not too surprising – many Chinese industrial groups aggressively seek new products outside their core operations. The firm’s claim that it is privately owned obscures acquisitions of former state-owned assets over the past few years, acquisitions which could not have occurred unless Sichuan Tengzhong had close ties to the Sichuan provincial government. That brings up the usual question of where financing for Chinese investment comes from, in particular whether it comes from state banks.

    If there are other companies interested in Hummer, they may complain the Chinese government, through its banks, is unfairly subsidizing Sichuan Tengzhong’s bid, as has happened elsewhere. On the other end of the spectrum, Beijing could refuse Sichuan Tengzhong’s application to buy Hummer, something it has done in other cases, due to losses suffered by Chinese firms in foreign acquisitions.

    Posted in International [slideshow_deploy]

    4 Responses to China Humming A Sweet Tune

    1. Barb -mn says:

      China buying hummer? Hmm… best think things through as this country will ban or add costs to those purchases due to global BS warming… but then are they using their money or ours? If the president of America is behind China's interest to buy, it's a cover-up that the taxpayers of America will be paying for China's purchase. Part of the president's punishment to the people. Under the table. Won't be a good sell here in America.

    2. Whicket Williams Kin says:

      China recieved it's missile technology from greedy americans who wanted cheap satillite launches. Now china has a nuclear umberella from Kansas City north. Do not delude yourself.

    3. Pingback: » Financial News Update - 06/02/09 NoisyRoom.net: “Extremism in the defense of liberty is no vice. Moderation in the face of tyranny is no virtue.” Barry Goldwater

    4. Thomas, Anchorage, A says:

      I have to laugh at this article because no current Hummer product is descended from a military vehicle. The original Hummer, descended from the military HMMWV, became the H1 with the advent of the H2, and was phased out with development and expansion of the H3. The H2 is built from the Chevy Tahoe chassis and the H3 is built from the Trailblazer chassis.

      Military technology the Hummer is not.

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