South African assembly of Hummer’s H3 SUV will not resume and all global production will be “consolidated” in the US, a General Motors spokesman confirmed on Monday.
Go deeper with GlobalData
GM and China’s Sichuan Tengzhong Heavy Industrial Machinery announced late on Friday they had “entered into a definitive agreement that would allow Tengzhong to acquire” Hummer.
“As part of the transaction, all global H3 production is being consolidated to the Shreveport [Louisiana]assembly facility,” Hummer communications director Nick Richards told just-auto by email. “We expect export H3 production to resume in the first half of 2010.”
Shreveport, which also builds Chevrolet and Isuzu-branded pickups, assembled 15,485 H3 SUVs and 3,685 H3T pickup variants last year, according to GM’s website.
Production of export H3s began at GM’s Port Elizabeth facility in South Africa in October 2006 with left hand drive models. Right hand drive vehicles for South Africa, Australia (from 2007) and other markets followed later. Initial production used the 3.7-litre in-line five-cylinder petrol engine and a diesel version was planned though never launched.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataGM African operations president and MD Steve Koch told South Africa’s Engineering News Online last June, after GM and Sichuan Tengzhong signed a memoradum of understanding for the Hummer sale, that ‘it was quite clear that the Hummer would not be produced in South Africa again, unless the deal fell through’.
“It is our understanding from [June’s] announcement that future assembly of the Hummer will be consolidated into a single location at Shreveport, in the US, where right- and left-hand drive petrol and diesel variants will continue to be produced for global markets,” Koch said at the time.
Local H3 production had reached around 10,000 units a year and the company employed 500 additional people for the Hummer assembly line, the report said, adding that GM South Africa had halted production in May. This, added to a weak South African new vehicle market, was expected to see the company’s payroll shrink by a estimated 1,700 people by the end of this year.
Koch also said the Hummer sale would affect 37 local component suppliers, producing around 160 different part numbers.
However, as production volumes of the off-roader had been low, he doubted whether any component suppliers were dependent entirely on Hummer production to keep their doors open.
“Since all engineering and design on Hummer is developed in the US, and 95% of components are sourced from the US, the impact on South African operations is minimal,” noted Koch at the time.
GM on Friday said the final definitive agreement meant Sichuan Tengzhong would acquire ownership of the Hummer brand, trademark and trade names, as well as specific intellectual property licence rights necessary to manufacture the vehicles.
“The buyer will also assume the existing dealer agreements relating to Hummer’s dealership network,” the automaker added.
According to a joint statement, Tengzhong plans to buy Hummer through an investment entity, in which it will hold an 80% stake.
Suolang Duoji, a private entrepreneur with holdings that include the Hong Kong-listed thenardite producer Lumena, will hold the remaining 20%.
Financial terms of the agreement were not disclosed.
GM said the deal was subject to the usual closing conditions and regulatory approvals “and/or review by government agencies in the US and China” although just-auto understands earlier concerns expressed by Chinese officials have been largely resolved.
But GM added: “The completion of the definitive agreement enables the companies to continue and further the overall regulatory review process.”
“Hummer is a strong global niche brand and this agreement signifies another important milestone in writing the next chapter for both GM and Hummer,” said GM president and CEO Fritz Henderson.
“For Hummer, the combination of its knowledgeable leadership team, vehicle design expertise and the capital financing of Tengzhong portend a successful future.”
Under the agreement, Hummer would contract vehicle manufacturing, key components and business services from GM during “a defined transitional time period”.
As part of this, GM’s Shreveport assembly plant would continue to contract assemble the H3 and H3T and AM General’s Mishawaka assembly plant would continue to assemble the H2.
Both facilities would produce vehicles for the Chinese firm until June 2011, with an optional one year extension until June 2012. The deal was expected to secure more than 3,000 jobs in the US related to the sale and manufacturing of Hummer vehicles, GM said.
Hummer would continue to be managed by members of its existing leadership team including James Taylor, who will remain in his current role as Hummer’s chief executive officer.
Prior to joining Hummer, Taylor was general manager of Cadillac where he oversaw a reinvigoration of the brand, leading key innovations in design and technology as well as the development of new models, GM said.
“We are fortunate to have a partner who understands and recognises the importance of continuing investment in Hummer’s heritage as a US-based and branded company with a view toward capitalising on global opportunities,” said Taylor.
“Backed by a privately owned and well-capitalised company, we are going to be able to focus on providing customers with more efficient models that deliver Hummer’s promise of authentic, purpose-built design and engineering.”
Once the transaction is complete, Hummer claimed, it would become the first automaker to offer an alternative fuel powertrain in every model, with the addition of E85 flexfuel capability in the 2010 H3 and H3T.
Hummer was also in the process of obtaining emissions certification for the diesel H3 that would be introduced in markets outside of North America, it added.
“The brand’s future product development will focus on improving efficiency and performance in current models with alternative fuel powertrains, more efficient [petrol] engines, six-speed transmissions and diesel engines.
“This transaction marks an exciting step for both Tengzhong and Hummer, as we invest in a business that has significant opportunity in the US and around the globe,” said Tengzhong chief executive officer Yang Yi. “We are excited about some of the initiatives already underway at Hummer that we believe our investment will be able to accelerate, particularly related to the creation of the next generation of more fuel-efficient vehicles to meet not only future regulations but also customer expectations.”
Graeme Roberts
