Selling out to big brother: China, Inc. and the U.S., Inc.
Friday, June 5, 2009 E-Mail this story Free Headline Alerts
BENNINGTON, VT Ñ ChinaÕs meteoric economic growth has morphed the macabre but now blurred images of the communist crackdown in Tiananmen Square twenty years ago. Indeed China has mesmerized much of the world with its export driven success as much as with its growing private sector alongside the still rigid political structures of the PeopleÕs Republic. For much of ChinaÕs population, memories of the Tiananmen massacre of pro-democracy students in June 1989 have now been bought off by BeijingÕs booming business bottom line.
Now in the midst of General MotorÕs economic meltdown, bankruptcy, and its practical nationalization by the United States government, an apparently private Chinese firm, sensing an opportunity, is set to acquire Hummer, an iconic jewel of what was once part of AmericaÕs largest company.
General Motors (GM) has tragically become Government Motors, and is set to shed or sell-off less profitable units among them Pontiac and Hummer. A Chinese company Sichuan Tengzhong Heavy Industrial Machinery has bid an undisclosed sum to purchase the ailing unit, but will keep 3,000 American jobs at the Louisiana factory. Tengzhong which already makes heavy equipment and construction vehicles, would be buying an off the shelf and top-notch brand, dealerships, but more importantly the technology.
Acquisition of Hummer, if it goes through, happily does not cover the totally separate production facility for its military cousin, the Humvee Ñ obviously larger, heavier, and more technologically versatile vehicles.
Hummer remains a status symbol, less today in the USA than overseas, where Hummers, Jeeps and many American SUV Ôs are wildly popular with the minority who can afford them. As with another Chinese companyÕs purchase of the British MG sports car marque, it appears that firms are seeking well-known boutique brands at lowball prices.
But HummerÕs proposed acquisition by Tengzhong Heavy Industrial Machinery presents the PRC with a double edged-sword; buying the firm is one thing. Making it profitable with the same factories and workers and American wages is quite another. Tengzhong says the production and jobs will stay stateside Ñ at least for now.
Yet thereÕs a wider issue here. Does ChinaÕs increasingly savvy political and business leadership wish to be viewed as the commercial buy-all juggernaut which invites certain political and consumer backlash? Recall that in the 1980Õs and the heyday of Japanese companies buying the best pieces on AmericaÕs business Monopoly Board, there was that reaction.
For example a state-run PRC firm was in a bloody multi-billion dollar bidding war for a major Australian mining company; Beijing has just backed out partially due to political blowback.
And what of the U.S. Congressional reaction? Shall there be hearings, or even a hint of oversight? ÒWe have to look at this cynically,Ó said Duncan Hunter, a Republican Congressman, representing the San Diego area. He told the Wall Street Journal. ÒAny money that is going to China or to Chinese companies is contributing in some way to ChinaÕs military buildup.Ó
Given that U.S. Treasury Secretary Timothy Geithner was coincidentally in Beijing on a mission to reassure the Chinese that the $767 billion in American debt which they are holding is really quite safe, (students at Peking University saw his speech as a great stand-up comic line), perhaps some Chinese businessmen are willing to make an investment in what they may view as a ÒprivatizationÓ sale of a faltering state-firm, Government Motors.
Twenty years ago the PeopleÕs Republic of China was already ridding itself of the worst and most constricting elements of the old Maoist system. Socio-economic changes were allowing a move from a socialist economy to a gradually opening business environment. China has prospered not because of her government, but because the government had enough sense to finally step aside, and allow the hard working and entrepreneurial spirit of the Chinese people to blossom forth in private business. Today the PRC exhibits a combination of crony capitalism, a vibrant private sector, and tarnished state run Òrice bowlÓ heavy polluting industries. Modern Mainland China evokes the corporate state.