UPDATE 2-GM signs deal to sell Hummer to Tengzhong

* Financial terms not disclosed

* Hummer sale still faces regulatory review in US, China

* Chinese entrepreneur Suolang Duoji would hold 20 percent
(Recasts first sentence, adds background on signing, analyst
and executive comments, other details)

By Kevin Krolicki and Bernie Woodall

DETROIT, Oct 9 (Reuters) - General Motors Co [GM.UL] signed
a deal on Friday to sell its iconic but tarnished Hummer brand
to an investment partnership headed by an obscure Chinese
machinery maker in an agreement that underscores the fast rise
and global ambition of the Chinese auto industry.

The deal with China's Sichuan Tengzhong Heavy Industrial
Machinery caps a year-long struggle by GM to shed a
military-derived SUV brand that had become synonymous with
gas-guzzling excess.

It marks the first time that Chinese investors have stepped
in as buyers into the distressed U.S auto industry.

The sale also comes at a time when China has emerged as the
world's largest auto market and GM remains majority-owned by
the U.S. government after being driven into bankruptcy.

"The long-term game plan is to ride the China wave," said
Jim Taylor, the GM executive who has helped steer the sale and
will remain in Detroit as the new company's chief executive.

The deal remains subject to regulatory review in the United
States and China. Chinese officials have signaled that the deal
would be treated favorably, Taylor said.

Financial terms were not announced. A person familiar with
the deal said earlier on Friday that the Hummer business would
be sold for about $150 million, far less than GM's early
estimate that Hummer could fetch more than $500 million.

Under the deal, Lumena Resources Corp (0067.HK) chairman
and founder Suolang Duoji would hold 20 percent of the
investment vehicle buying Hummer.

Tengzhong would hold the remaining 80 percent.

The Hummer sale is part of a drastic restructuring plan by
GM, which also involves the disposal of its Saab, Opel and
Saturn operations as part of U.S. government-sponsored
restructuring in bankruptcy.

Tengzhong, a little-known heavy machinery maker, has been
in detailed negotiations with GM since it announced an initial
plan in June to acquire the premium off-road Hummer brand.

Tengzhong executives, including Chief Executive Yang Yi,
have been in Detroit for more than a week for the final round
of negotiations after GM missed an initial goal of completing
the deal by the end of September.

Aaron Bragman, an auto analyst with IHS Global Insight,
said GM's move to jettison Hummer would help the automaker
rebuild its image as more environmentally responsible.

"Hummer has become a bit of an albatross around their
neck," Bragman said.

GM, which emerged from bankruptcy in July after taking $50
billion in U.S. government funding, is cutting its stable of
brands in half to focus on Chevrolet, Cadillac, Buick and GMC.

A KINDER, GENTLER HUMMER?

Hummer's sales peaked in 2006 but have been hit hard since
by a slumping U.S economy, higher gasoline prices and a shift
in U.S. consumer tastes away from Hummer's heavy-duty SUVs and
its military-derived styling.

Through September, Hummer's U.S. sales were down 64 percent
this year.

Analysts said the new Hummer faces a difficult task of
revamping a macho brand associated with the excess of the past
economic boom in the United States.

The brand had its origins in a multipurpose vehicle known
as the Humvee that was used by the U.S. military. Those were
made by a company called AM General.

GM bought the Hummer brand from AM General in 1999 and went
on to sell the H1, H2 and H3 and H3T civilian models.

California Gov. Arnold Schwarzenegger, who won fame as
bodybuilder-turned-Hollywood-action-hero before moving to
politics, added to the profile of the brand as an early buyer.

"If I'm GM and I can sell it, I'm doing a jig," said
Autoconomy.com analyst Erich Merkle. "There was a time when
Hummer was quite popular, but that was earlier in this decade
when people wanted McMansions and suburban assault vehicles."

GM's Taylor said it would take months for the new Hummer to
set up for sales and distribution in China, a market where the
brand has no established sales network.

In the meantime, he said, the image of the Hummer brand
would have to become more "green" and deliver better fuel
economy. "It's something we have to address," he said.

GM will continue to manufacture the existing Hummer models
and provide engineering support for Tengzhong on a contract
basis. That provision of the deal preserves about 3,000 U.S.
manufacturing jobs until at least the middle of 2011.

GM's Shreveport, Louisiana, plant will continue to assemble
the H3 and H3T. A plant in Indiana operated by AM General
[MAFHDG.UL] will continue to produce the older H2 model.

Those contract manufacturing deals run until June 2011 and
can be extended for a year, GM and Tengzhong said.

Credit Suisse has been the financial adviser to Tengzhong.
Shearman & Sterling has been the Chinese company's legal
advisor. Citi was financial adviser to GM.
(Reporting by Kevin Krolicki and Bernie Woodall, editing by
Gunna Dickson and Matthew Lewis)