Fearing Failure, China May Nix Hummer Deal

when a little-known Chinese company agreed to purchase Hummer from General Motors in June, the deal was initially seen as another symbol of a rising China's might. But recent murmurs from Beijing suggest that authorities might nix the acquisition by Sichuan Tengzhong Heavy Industrial Machinery; state media are reporting that Hummer's environment-crushing reputation doesn't fit with China's new drive to go green. Yet environmental concerns are just a public excuse. According to officials, Beijing's real worries are much more hard-nosed: Should Tengzhong fail to restructure the ailing SUV maker, it would damage China's image in the international marketplace. And Beijing has good reason to believe some of its domestic auto companies aren't ready to drive a foreign brand. The eager buyer is unknown even in China, and its expertise lies mainly in dump trucks and cement mixers. The past is sobering: when China's biggest carmaker, SAIC, bought a stake in South Korea's Ssangyong Motor Co. in 2004, it ran afoul of Korean labor unions, which obstructed the hoped-for turnaround. Foreign assets are "hard to digest," says Eduardo Morcillo, an M&A expert with InterChina Consulting. Still, Ssangyong was barely known outside Asia. Failing with an international brand like Hummer would cause far sharper stomach pains.