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Hummer puts China's Tengzhong on the map, almost

CHENGDU, China (Reuters) - Even in the southwest Chinese home base of Sichuan Tengzhong Heavy Industrial Machinery, residents are more familiar with the gas-guzzling Hummer brand that it is looking to buy from bankrupt General Motors GMGMQ.PK than with the heavy machinery maker itself.

Employees work at a workshop of Tengzhong Heavy Industrial Machinery Co in Deyang, Sichuan province, June 3, 2009. The little-known player in China's heavy machinery industry emerged from nowhere to agree to buy General Motor's Hummer brand, raising eyebrows among peers who question whether it can turn around the U.S. auto maker. Picture taken June 3, 2009. REUTERS/China Daily (CHINA TRANSPORT BUSINESS) CHINA OUT. NO COMMERCIAL OR EDITORIAL SALES IN CHINA

Little-known Tengzhong, which makes special-use vehicles and bridge and highway components, emerged last week as the surprise buyer of Hummer -- a move that has delighted locals but raised eyebrows elsewhere.

“I think Hummer is a famous brand,” said Zhang Youyi, an engineer who wasn’t initially sure if Tengzhong was even located in Chengdu, the capital of Sichuan, a farming and industrial powerhouse.

“It would be good news for Chengdu,” said Zhang, referring to recent tragedies that have struck the province -- from a mystery bus fire that killed 27, a landslide that buried over 80 people and last year’s earthquake that killed more than 80,000.

Others aren’t so sure.

Besides flying in the face of Beijing’s push to more fuel efficient cars, Tengzhong’s non-binding deal to buy a brand that has become a metaphor for macho, gas-guzzling waste also needs to deal with regulatory and financing issues.

Tengzhong’s management team is in the United States hammering out a deal with GM, and could return to China this week, said a source close to the talks.

“The purchase of a U.S. auto brand famous for being a gas-guzzler obviously does not make sense,” the China Daily wrote in an editorial on Monday.

It matters little that Hummers get fewer than 8.5 kilometers to the liter (20 mpg) and can cost more than $65,000 -- almost a lifetime of work for the average urban Chinese worker. The Hummer was never about being average.

“You don’t see many Hummers in Chengdu,” said Liu Shan, a schoolteacher. “They’re for rich people. Ordinary people like them for wedding pictures,” she said.

“LET THE WORLD FOLLOW US”

At the entrance to Tengzhong’s factory, a series of grey buildings, a slogan in large red characters proclaims, “Let the World Follow Us.”

But workers arriving for the early Monday shift declined to talk to reporters, instead handing out slips of paper they’d been given with a Hong Kong phone number of the company’s public relations firm.

“Nobody can talk about this,” said a receptionist, referring all inquiries to the company website’s phone numbers.

The oversized Hummers are geared for off-road use, but have become symbols of machismo for the bulging wallets of celebrities such as sumo wrestling star Asashoryu, California Governor Arnold Schwarzenegger and the newly rich in Russia.

But with high gas prices, a recession and environmental issues coming to the fore, even the “Terminator” star eventually sold his fleet of eight Hummers.

The Tengzhong deal has been met with skepticism and even ridicule from Chinese auto executives, industry analysts and the media.

The People’s Daily and Xinhua news agency have both blasted the bid as risky, impractical and rash, pointing to Tengzhong’s lack of experience in developing, marketing and manufacturing automobiles. Some have speculated Tengzhong may be a front for other interests.

The Shanghai Securities News reported last week that funding from private companies in nearby Shanxi Province might be the driving force behind the bid.

Hummer’s plunging global sales -- down 65 percent in January-March, are beside the point, some say.

“We in Sichuan like small cars,” said Hu Bing, the owner of a small grocery store. “But if Hummer came here, maybe we could attract more investment from other international car companies.”

The Sichuan provincial government backs the deal, but that support does not include explicit financial support, said the source close to the deal, who asked not to be named due to the sensitivity of the issue.

The automobile industry has been pegged by Sichuan’s provincial government as one of four strategic industrial growth engines for future growth.

Chongqing Changan Automobile Co 000625.SZ said last week it would build a new production facility next to Sichuan for small vehicles, using an initial investment of 2.5 billion yuan ($366 million). Changan is a Ford Motor F.N China partner.

($=6.83 yuan)

Editing by Ken Wills & Ian Geoghegan

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