Hummer of a challenge for Chinese firm

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Scooping up the Hummer brand from bankrupt General Motors was the easy part.

The difficulty for China's Tengzhong Heavy Industrial Machinery Co, Ltd now is convincing critics it was the right move.

"It's a good time for Chinese companies to acquire overseas brands as the assets are relatively cheap because of the industry downturn," said Garry Wang, China M&A specialist with consulting firm Mercer LLC. "But remember, an acquisition only works when it matches the company's long-term strategy."

Tengzhong, a four-year-old Chengdu-based industrial machinery maker, announced in a joint statement yesterday it will pick up the rights to the Hummer brand from GM for an undisclosed price. According to GM's bankruptcy files, Hummer's value was around $500 million, Bloomberg reported yesterday

"From the point of view of business strategy, it might be a good deal for Tengzhong to buy Hummer right now," Wang said.

Not so, according to other domestic analysts, who poured downright scorn on Tengzhong. Marketing specialist Wang Yukun called Tengzhong's move "childish". Financial commentator Ye Tan described it as "unpromising".

The Hummer, seen as a gas guzzler, has been faced with slumping sales.

According to the joint statement, Hummer will continue to maintain its headquarters and operations in the US, and will continue to be managed by its existing leadership team, which intends to expand Hummer's dealer network worldwide, particularly into new and under-served markets such as China.

"In the first six months to one year, Tengzhong should avoid any changes to the senior management team, as it would be quite difficult for a Chinese company with no overseas market experience to merge a global brand," Wang suggested.

Tengzhong is one of the largest privately-owned enterprises in Chengdu, capital of Sichuan province. It specializes in making special-purpose vehicles and heavy machinery for the construction of roads and bridges and for the energy industry.