• by Karl Greenberg , June 3, 2009

It seems likely that GM will sell its Hummer brand to Sichuan-based Tengzhong in the third quarter through a deal brokered by Credit Suisse, Shearman & Sterling, and Citi -- the latter acting on behalf of GM. But is GM getting an easy out or losing a valuable brand?

Tengzhong, which makes heavy industrial equipment, says it wants Hummer for access to the premium off-road segment, both in the U.S. and in potentially big global markets like China.

Tengzhong CEO Yang Yi suggested that Tengzhong would pour money in, but not use heavy hands to manage, by "investing in the business, allowing Hummer to innovate and grow in exciting new ways under the leadership and continuity of its current management team."

Per the deal, Hummer headquarters and operations would stay in the U.S. -- with the U.S. leadership team overseeing expansion of the Hummer dealer network globally, even in China itself.

Yi also said the company will develop fuel-efficient versions of Hummer.

Art Spinella, principal of CNW Market Research in Bandon, Ore., says the U.S market is small, and will remain so. "The real market is global," he says. "And there's a giant market for [Hummer] in China, but that market is going to be mostly for government and military use."

Spinella says the brand can survive in the U.S. "The market is there, but it's small, and I think a turbo diesel version could do well here, more as an H3 [the smallest Hummer based on a mid-sized pickup platform], not the H2 [which shares a platform with Chevy Suburban]. People who are Hummer people want them. Look at what Maserati and Ferrari do here -- it's incremental."

General Motors only sold 1,094 of the vehicles last month, 40.6% fewer than in the month last year. Year-to-date, Hummer sales are off 63.7%.

Larry Weisman, a Ponte Vedra Beach, Fla.-based investment advisor who owns a Hummer H2, says he loves the vehicle and would buy another, especially a more fuel-efficient one. "Honestly, unless gas goes up to $5 a gallon, I'd still want to own it," he says. "I like it because we fit in it easily, it rides nicely, the seats are comfy, and I live in Florida. It gives me a feeling that if there were a hurricane or tropical storm, I could get out of here under most circumstances."

He does, however, consider it a turnoff that the company might be Chinese. "Hummer is a niche brand; it's not for everyone. So it's hard to believe that someone in the U.S. could not have found the money to buy the company." But he says it wouldn't keep him out of showrooms. "It's a turnoff, but it's not a deal-breaker," he says.

General Motors says that under the terms of the deal with Tengzhong, Hummer H3 and H3Ts would be built at GM's Shreveport, La. assembly plant through at least 2010.