Oct. 9 (Bloomberg) -- General Motors Co., seeking to shed brands after emerging from bankruptcy, is near an agreement to sell its Hummer sport-utility vehicle business to China’s Sichuan Tengzhong Heavy Industrial Machinery Co. for about $150 million, three people familiar with the deal said.

The parties are trying to reach a deal today, said the people, who asked not to be identified because the negotiations are private.

GM may accept a lower price for Hummer than the $500 million value it estimated in bankruptcy court documents to make progress on restructuring after the sale of the Saturn brand fell through last week. For Tengzhong, a deal would propel the industrial manufacturer into the global auto market.

“It’s important for GM to get some cash, without a doubt,” said Joseph Phillippi, president of AutoTrends Consulting Inc. in Short Hills, New Jersey. “Any appreciable amount they can get means more reserves, means keeping your powder dry until this economy improves.”

Tengzhong, based in Chengdu, China, said in June it was in talks to buy Hummer as GM plans to shed half of the eight brands it sells in the U.S. The companies said the deal would protect more than 3,000 corporate, manufacturing and dealership jobs.

For Tengzhong, a privately owned maker of special-use vehicles, structural components for highways and bridges, and construction machinery, buying Hummer would add a brand with cachet it can use to expand in emerging markets.

Regulatory Hurdles

The sale requires approval by U.S. and Chinese regulators. Tengzhong plans to apply for Chinese approval once a binding agreement with Detroit-based GM is made, one of the people said.

Nick Richards, a Hummer spokesman, and Christina Stenson, a New York-based spokeswoman for Sichuan Tengzhong, declined to comment. Zhao Xiaolu at Brunswick Group Ltd., which is handling public relations matters related to the deal for Tengzhong, didn’t answer calls to her mobile phone.

Tengzhong would assume Hummer’s dealer accords and a senior management team and plans to use GM for contract assembly. The purchase is the company’s first entry into the passenger-vehicle business.

Chinese Regulators

Chinese regulators may oppose the deal because the government is trying to promote more environmentally friendly vehicles, said Xing Haizhi, an analyst with Cinda Securities Ltd. in Beijing.

“I am not optimistic about the deal because it carries too much risks,” he said. “The deal is not much related to the auto industry given that Hummer is in a very niche segment and production of Hummer in China doesn’t fit in with government priorities.”

Credit Suisse Group AG is Tengzhong’s financial adviser on the deal, and Shearman & Sterling LLP is its international legal counsel. Citigroup Inc. is advising GM.

GM emerged from bankruptcy on July 10 and is keeping its Chevrolet, Cadillac, Buick and GMC brands for sale in the U.S. Koenigsegg Automotive AB, a Swedish maker of sports cars, has agreed to buy Saab, while the Pontiac and Saturn brands are being eliminated.

Beijing Automotive Industry Holdings Co. is also part of Koenigsegg’s Saab bid as Chinese automakers seek overseas acquisitions to access U.S. and European markets. Geely Holdings Group Co., China’s biggest privately owned automaker, said last month it’s considering a bid for Ford Motor Co.’s Volvo unit.

GM bought the license for the Hummer brand from AM General in 1999 and started selling the $140,000 H1, a 7,600-pound (3,400-kilogram) SUV patterned after the all-terrain military vehicle popularized for road use by actor Arnold Schwarzenegger, who is now California’s governor.

Rising gasoline prices eventually eroded demand. GM halted production of the H1 in 2006, when Hummer’s U.S. deliveries peaked at 71,524, according to Autodata Corp. U.S. sales of the SUVs, which start at about $31,000 for the H3, fell 51 percent in 2008 and 63 percent this year through September.

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net; Jeff Green in San Francisco at jgreen16@bloomberg.net; Katie Merx in Southfield, Michigan, at kmerx@bloomberg.net

Last Updated: October 8, 2009 23:40 EDT