Under the deal, Hummer's operations would stay in the United States and would be run by existing management after the takeover. Tengzhong will contract vehicle manufacturing and business services from GM, leaving the brand's U.S. jobs largely intact. It will also sign a long-term contract for auto assembly and material supply with GM, and has subtly left open the option of setting up Hummer production in China in the future.

"The Hummer brand is a symbol of adventure, freedom and exhilaration, and we plan to continue that heritage 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," Yang Yi, CEO of Tengzhong, said in a statement.

Tengzhong will not take on any of Hummer's debt, he added, giving no financial details of the deal since negotiations are still under way. He said only that it was "a quite reasonable price."

A hot potato

For teetering GM, the deal is a long-anticipated way to take the failing brand off its hands. That explains why the U.S. government has expressed strong support for the sale. But at a time when international crude oil prices are roaring back and environmental issues are in the spotlight, buying such a macho-style and energy-depleting brand seems an odd choice.

Analysts believe the deal may face tough regulatory hurdles since China has been pushing for small-capacity and energy-efficient vehicles to improve the environment. The brand's plunging sales in the United States are proof of its fading appeal to increasingly environmentally conscious consumers, they said. According to Xinhua News Agency, the brand's global sales plummeted 51 percent year on year in 2008 as fuel prices skyrocketed, and were down 62 percent in the first quarter this year.

The product's disregard for the environment has taken the shine off the deal, though it may be a cheap bargain for Tengzhong, said Zhou Minliang, a researcher with the Chinese Academy of Social Sciences, in an interview with the China News Service.

Lu Zhongyuan, a researcher at the Development Research Center under the State Council, even suggested that the Chinese Government tighten scrutiny of the deal on environmental protection grounds. "What can we do with something that the United States is trying to get rid of?" he asked.

To play down worries, Tengzhong has vowed to make the vehicle greener by investing in research and development of energy-conserving technologies. It will develop a new power system in order to increase the vehicle's fuel efficiency, the company added.

However, the technological breakthrough may be easier said than done. The research and market promotion would require huge investment, said Mei Xinyu, an associate researcher at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce. For a company already reeling from sales freefall, this would create a huge financial burden, he said. In addition, the entrenched perception of the brand among consumers cannot be turned around overnight, he added.

Indigestion woes

For any Chinese company that harbors an ambition to become a global player, the prospect of owning a famous brand is truly tantalizing. But the question for Tengzhong is, if the century-old GM failed to bring Hummer back to life, how can a little-known Chinese heavy machinery company?

Although Tengzhong has publicly claimed that it has the capability to purchase major U.S. brands, concerns are still proliferating that it is biting off more than it can chew. Its output value reportedly stood at around 1.57 billion yuan ($300 million) in 2008, far less than the value of the Hummer brand, estimated at $500 million. More importantly, Tengzhong has never made a substantial passenger vehicle or managed a plant overseas.