UPDATE: GM Finalizes Deal To Sell Hummer To China's Tengzhong

General Motors Co. on Friday finalized an agreement to sell its Hummer truck brand to a Chinese machinery manufacturer, marking China's first major entry into the U.S. auto market.

Sichuan Tengzhong Heavy Industrial Machinery Co. (STHIM.YY) bought Hummer in a $150 million deal, according to several people familiar with the deal. Under the terms, GM will continue to manufacture the vehicles until no later than 2012, when Tengzhong will take over production.

In Hummer, Tengzhong hopes to create a stable of trucks that are more fuel-efficient and environmentally friendly than the current lineup, which had become synonymous with America's addiction to gas-guzzling SUVs. The company is working to develop a diesel powered Hummer to go on sale outside North America.

Financial terms of the deal weren't disclosed. Tengzhong will acquire the Hummer brand, trademark and intellectual property rights needed to make the vehicles. Hummer brand dealers will continue to operate under the same contracts they had in place with GM.

A finalized deal - which needed the blessing of China's government - has important overtones. It is first full-fledged acquisition of a troubled auto brand in the wake of the global economic crisis, which sent some auto makers such as GM teetering further.

India's Tata Motors Ltd. (TTM,500570.BY)) last year bought Ford Motor Co.'s (F) premium Jaguar and Land Rover brands. China's Geely Automotive is interested in buying Ford's remaining international brand Volvo Cars.

A flurry of such potential deals highlights Chinese companies' global ambitions, but a question remains as to whether Chinese companies such as Tengzhong would be able to revitalize troubled auto brands, especially given their executives' limited experience running global operations.

Hummer's turnaround will likely prove a challenge, especially in the U.S. where the market for SUVs has fallen dramatically in recent years. Hummer sales are down 64% from a year ago. GM sold just 426 Hummers in September nationwide.

Tengzhong is buying 80% of Hummer, with local tycoon, Li Yan buying the rest through Lumena Resources Corp. (0067.HK). The 46-year-old is chairman of the Sichuan-based company, which he founded and successfully listed on the Hong Kong Stock Exchange in June. Lumena is one of the world's biggest producers of sodium sulphate, a key raw material used in detergents, glass and pharmaceutical products.

Finalizing the sale for Hummer comes little more than a week after its planned sale of the Saturn brand to Penske Automotive Group Inc. (PAG) fell through. GM is also trying to sell the Saab brand as part of its restructuring, while the Pontiac line will be phased out the next year.

-By Sharon Terlep, Dow Jones Newswires; 248-204-5532; [e-mail].

-Kevin Kingsbury and Norihiko Shirouzu contributed to this article.