Lawmaker Slams Bank of America on Bailout Exit

Bank of America Chief Executive Kenneth D. Lewis said his company was still in talks with federal officials on how to compensate the government for a prior loss-sharing agreement, according to a letter released by a lawmaker on Thursday.

Mr. Lewis called the government talks “thoughtful and professional” and said Bank of America was confident it would resolve the issue, in the letter to Representative Edolphus Towns, chairman of the Committee on Oversight and Government Reform, Reuters reported.

Mr. Towns, however, called on Mr. Lewis to repay the taxpayers and stop “stonewalling.”

Bank of America has been negotiating how much it must pay for an agreement — part of a $20 billion bailout for the firm — in which the government said it would share losses on $118 billion of toxic assets.

“It seems that the bank wants to have it both ways — all the benefits of government insurance without having to pay a dime for all of its benefits,” Mr. Towns said in statement.

Mr. Towns’ committee is examining the role of the government in Bank of America’s acquisition of Merrill Lynch.

Tengzhong Said to Near Hummer Deal on Friday

Tengzhong of China may complete a deal to buy General Motors‘ Hummer business for about $150 million on Friday, in what would be China’s biggest brand grab since Lenovo  bought I.B.M.’s PC unit in 2005, Reuters reported, citing a source with knowledge of the deal.

A completed deal would also be the first major acquisition of distressed American auto assets in the global downturn by Chinese firms seeking to acquire prominent names and Western technology.

“G.M. and Tengzhong may close the deal as early as today,” the source told Reuters.

G.M. declined to comment and Tengzhong could not be reached immediately for comment, the news service said.

The Hummer sale is part of a drastic restructuring plan by the Detroit automaker, which also involves the disposal of its Saab, Opel and Saturn operations as part of a government-sponsored bankruptcy recovery plan.

Tengzhong, a little-known heavy machinery maker, has been in detailed negotiations with G.M. since it announced an initial plan in June to acquire the rights to the premium off-road Hummer brand.

Tengzhong still needs approval from the Chinese government, including the Ministry of Commerce, which industry and government officials say holds the ultimate authority over the deal.

“I think the Tengzhong-Hummer deal is very likely to go through as commerce ministry officials had said repeatedly that overseas acquisitions would be rational behavior amid the global financial crisis,” Yi Junfeng, an analyst with Changjiang Securities, told Reuters.

Many of China’s fledgling automakers, including Geely Automobile Holdings, are keen to establish a global profile and secure quick access to technology, and are taking a look at established global brands put up for sale by industry giants struggling to survive the recent slump.

They have often confronted obstacles to buying nationally prominent overseas names, however, with media reporting of opposition in Sweden to a sale of Ford Motor’s Volvo car unit to the Chinese. In September, Geely confirmed its interest in the Swedish brand.

Other Chinese industries have also confronted problems in their efforts to acquire Western brands and assets.

Deals for sensitive American technology and energy assets have been derailed by political opposition, with even the successful $1.25 billion purchase of I.B.M.’s PC business by Lenovo in 2005 running into issues. The United States State Department limited the use of thousands of computers purchased from Lenovo because of security concerns.

Tengzhong, which harbors ambitions to break out of its southwest China base, where it makes infrastructure equipment, is expected to retain Hummer’s existing senior management and operational team, saving more than 3,000 U.S. jobs, according to terms of a preliminary agreement.

It will also keep the dealership network of the U.S. sport utility vehicle unchanged. Hummer is currently sold in more than 30 countries, including China.

Reuters, citing bankers familiar with the situation, said Hummer could fetch about $100 million of cash in addition to other commitments, far less than the $500 million G.M. had expected Hummer to bring when it went on sale in June 2008.

It would also be the first successful purchase of a famed Western auto brand by a Chinese company following recently aborted acquisition attempts by other Chinese auto groups, including Beijing Automotive Industry Holdings‘ failed bid for Opel.

B.A.I.C. was shut out of G.M.’s discussions with other bidders for Opel but later reached a tentative pact to take a minority stake in Swedish luxury sports car maker Koenigsegg, which had struck a deal to take over loss-making Saab from G.M.

China’s Geely Weighs Bid for Ford’s Volvo Unit

Geely Automotive of China said Wednesday that its parent wants to bid for Ford’s Volvo Car, becoming the latest Chinese automaker to chase a foreign brand in a global industry overhaul.

The move could bolster the profile of Geely, a small, home-grown carmaker and, more importantly, give it access to Volvo technology it needs to upgrade its cars, analysts told Reuters, though some doubted it could manage an international brand.

Geely’s privately held parent, Geely Holding Group, would make any bid in conjunction with a government-backed investor, its chief executive, Gui Shengyue, told Reuters by telephone.

“I believe if Volvo is for sale and Ford has a global announcement, then our parent company will participate,” Mr. Gui said. “It is interested in Volvo’s sedan business and not trucks.”

Mr. Gui added that Geely’s parent was waiting for Ford to decide whether to sell the Swedish car maker, but that Hong Kong-listed Geely would not participate in any bid.

Rather than merely taking a stake in Volvo, Geely’s parent would seek full ownership, Mr. Gui told Reuters, adding Ford will make a decision on whether to sell Volvo within a month.

“On the assumption that the parent company successfully acquires Volvo, it will fine tune the product line and technology until Volvo becomes profitable, and then inject the assets into the listed company,” Vivien Chan, auto analyst with Sinopac Securities, told Reuters.

Geely, which once sold the cheapest cars in China, has been upgrading its models to tap China’s increasingly affluent drivers.

Some analysts cast doubt on the ability of privately-owned Geely to manage an international brand.

“It’s a risky move even though it may help raise Geely’s profile eventually,” Ji Junfeng from Changjiang Securities told Reuters.

“I’m not sure how Geely can turn around a brand like Volvo, but maybe we should not underestimate the ability of privately owned car makers. They have been growing very fast on their own with little help from the government,” he said.

Major Chinese automakers, including Beijing Automotive Industry Holding, have tried several overseas acquisitions in recent years with mixed results.

Chery Automobile, Hunan Changfeng Motors and several other Chinese automakers have held initial talks with European or American auto brands, but refrained from making any commitments, industry executives have said.

China’s largest automaker SAIC Motor may take a passive stake in Saab Automobile by teaming up with luxury sports car maker Koenigsegg, Reuters said, citing a source with knowledge of the situation.

So far, Sichuan Tengzhong Heavy Industrial Machinery, a little-known heavy machinery maker, is the only Chinese company to have announced a significant overseas auto buy, agreeing to acquire G.M.’s premier off-road brand, Hummer. That deal is continuing.

Western Brands May Be a Step Too Far for China

Chinese carmakers are venturing on to the global stage with bids for Western brands from Volvo and Hummer to Saab, but there are doubts that inexperienced Chinese firms can manage the transformation such deals would bring, Reuters writes.

“Getting involved in European companies is likely to bring a complexity of personnel management that will blow their minds,” Graeme Maxton, a Europe-based independent auto industry analyst, told the news service, noting Chinese companies’ poor track record of managing their businesses.

After months of speculation, China’s Geely Automotive has this week admitted its interest in Ford Motor’s Volvo unit, whileBeijing Automotive Industry Corporation, whose advances on Opel were spurned by General Motors just weeks ago, is now eyeing the Detroit automaker’s Saab business.

“It’s no surprise China’s auto industry wants to go international,” Klaus Paur, director of North Asia automotive division of the industry consultant TNS, told Reuters. “But I have the impression they are getting too ambitious. There are a lot of question marks here as they don’t even have a solid brand in their home market.”

China, which this year overtook the United States as the world’s biggest auto market, has been a boon for Volkswagen, G.M. and other foreign carmakers, which accounted for nearly three-quarters of all cars sold there last year.

Many local manufacturers such as Geely and Chery Automobile have so far competed at the lower end. Beijing Automotive, a partner of Daimler AG and Hyundai Motor, doesn’t even have its own car brand.

But as wealth grows in the world’s third-largest economy, local manufacturers hope to build their own profiles by buying up distressed auto assets in mature markets.

“The temptation for them is obviously quick access to technologies, brands and mature markets,” a China-based senior executive with a major American automaker, who asked not to be identified due to the sensitivity of the issue, told Reuters. “But I’m not sure they can handle a brand like Volvo and turn it around.”

Mr. Maxton said there had been few examples of successful auto industry acquisitions, even for mature carmakers.

By contrast, Japan’s most successful automakers — Toyota Motor and Honda Motor — have followed an organic approach to growth, choosing to expand on their own.

Honda briefly owned Britain’s Rover, which now belongs to China’s SAIC Motor Corporation, but Japan’s No.2 automaker has since shunned buying brands for the sake of expansion.

South Korea’s Hyundai Motor Company has also opted to work its way up on its own.

Political barriers also loom large.

China has found it tough to buy nationally important brands overseas and there have been reports of Swedish opposition to selling Volvo to the Chinese.

Beijing Automotive was shut out of G.M.’s discussions with other bidders for Opel, due largely to the Chinese firm’s proposal to move Opel’s operations to China, executives and analysts said. Beijing Automotive’s chairman, Xu Heyi, blamed what he called Western discrimination toward Communist China for the failed attempt on Opel.

Beijing Automotive instead reached a tentative pact on Wednesday to take a minority stake in Swedish luxury sports car maker Koenigsegg, which had struck a deal to take over loss-making Saab from G.M.

“If we were unable to sail through choppy waters on our own, we still have a chance to get to the other side of the ocean by taking other people’s boats,” Mr. Xu told Reuters.

SAIC, China’s top automaker, had toyed with a similar idea, but still had painful memories of its ill-fated acquisition of South Korea’s Ssangyong Motor, Reuters said, citing a source close to the Chinese automaker.

Chery, Hunan Changfeng Motors and several other Chinese automakers had held early talks with European or American auto brands, but have held off making any commitments.

So far, Sichuan Tengzhong Heavy Industrial Machinery, a little known heavy machinery maker, is alone in unveiling a tentative deal to take over G.M.’s gas-guzzling Hummer brand, though Chinese regulators, aware that Beijing is pushing a ‘drive-small, drive-green’ policy, could reject that deal, analysts said.

“No one can be sure of the Tengzhong-Hummer deal until they see the red stamp,” Ji Junfeng, an analyst at Changjiang Securities, told Reuters.

Hyundai Motor Announces China Truck Venture

Hyundai Motor said Sunday it had agreed to start a $400 million truck manufacturing venture in China with a local partner as part of a plan to build up its operations in the Chinese auto market, the world largest.

Hyundai Motor, South Korea’s largest automaker, said it signed an initial agreement with the Chinese commercial vehicle manufacturer Baotou Bei Ben Heavy-Duty Truck Company, and had set a sales target of 100,000 heavy duty trucks in China by 2014, The Associated Press reported.

Under the deal, signed Saturday in Seoul, the two companies will invest a total of $400 million to set up the 50-50 joint venture next year, Hyundai said. It will take over the Chinese company’s existing large truck business that can manufacture 40,000 vehicles a year.

Hyundai, which already makes passenger cars in China, said it would initially focus on heavy-duty trucks in the new venture and gradually increase its investment to include what it described as a ”full lineup of commercial vehicles.”

“The joint venture will initially launch a refreshed Baotou Bei Ben model and then launch a brand new model by 2012 with input from Hyundai’s modern technology and equipment, gaining competitiveness in the Chinese commercial vehicle market,” Hyundai said in a release.

”Entering China’s commercial vehicle market is essential in establishing Hyundai’s reputation as the most comprehensive car manufacturer in the world’s largest auto market,” Choi Han-young, vice chairman in charge of Hyundai’s commercial vehicle division, said at the signing of the deal, according to the release.

”Our business in China will play a pivotal role in helping us achieve our global sales target of 200,000 units in commercial vehicles by 2013,” he added.

Hyundai and affiliate, Kia Motors, form the world’s fifth-largest automotive group. Both companies have been expanding aggressively overseas.

Hyundai has factories in China, India, Turkey, the United States and the Czech Republic. Kia, in addition to its recently opened United States plant, also manufactures automobiles in China and Slovakia.

Both automakers reported record-high quarterly net profits in the three months ended Sept. 30.

Hyundai also plans to enter the commercial vehicle market in the United States within two or three years by setting up a venture like the one in China, South Korea’s Yonhap news agency quoted Mr. Choi as saying in an interview published Sunday. After the United States, Hyundai would focus on Europe, Mr. Choi said, according to Yonhap.

South Korea signed a free trade agreement with the United States in 2007, though the deal has yet to take effect as it remains unratified by legislators in both countries. South Korea has also concluded a free trade deal with the European Union, though a final agreement has yet to be signed and ratified.

South Korea enjoys large trade surpluses in automobiles with both the United States and Europe and that has been a source of friction for the country with both Washington and Brussels.

Takes 60 Percent Stake in Turquoise

The London Stock Exchange said on Monday that it had agreed to take a 60 percent stake in the rival trading platform Turquoise, and that it planned to create a pan-European trading venture by merging it with one of its own units.

The new venture, which will retain the Turquoise name, will include the London exchange’s “dark pools” trading platform Baikal Global. Dark pools are trading platforms where banks, hedge funds and institutional investors can trade large blocks of shares in secret.

Existing shareholders in Turquoise will own 40 percent of the new company.

The London exchange said it had agreed to finance the venture for the first two years, and expected to incur additional costs of up to £20 million($32.3 million) in the current year, reflecting restructuring and integration.

The exchange added that it intended to bring in other investors by selling up to a further 9 percent of the business.

The exchange said in October it was in exclusive talks with Turquoise, which was started last year by a group of nine investment banks frustrated by the level of fees at the exchange. While not profitable, it gained about a 7 percent market share.

Grabbing a Piece of the New York Deal

Putting together a merger as complicated as the deal between NYSE Euronext and Deutsche Börse — which are forming the world’s largest financial market for stocks and derivatives — is no easy task.

Not surprisingly, both companies brought in a cadre of advisers to help put the deal together.

NYSE Euronext was advised by Perella Weinberg Partners and BNP Paribas and the law firms Wachtell, Lipton, Rosen & Katz; Milbank, Tweed, Hadley & McCloy; and the Dutch firm Stibbe.

Deutsche Börse was advised by Deutsche Bank, JPMorgan Chase and the law firm Linklaters.

The NYSE Euronext assignment is a big achievement for Perella Weinberg, the boutique co-founded in 2006 by Joseph R. Perella. (Several bankers at much larger institutions have expressed surprise at how the firm leapfrogged over them to get the assignment.)

The firm has snagged advisory roles in several major deals since its founding, including Wachovia’s sale in 2008 to Wells Fargo and the Pepsi Bottling Group’s takeover by Pepsico in 2009. But several of its most recent major deals — like the leveraged buyouts of J.Crew and Del Monte, the sale of Massey Energy to Alpha Natural Resources and Qwest Communications‘ merger with CenturyTel — have been advising company boards, a less-lucrative role.

Deutsche Börse’s advisory team poses fewer surprises, with Deutsche Bank serving as a natural lead adviser alongside JPMorgan.

Yet the joint news release on Tuesday also mentioned other firms that provided “further financial advice.” In this case, Credit Suisse and Société Générale were additional advisers to Detusche Börse, and Goldman Sachs and Morgan Stanley worked for NYSE Euronext, people briefed on the matter told DealBook. (Morgan Stanley already has a piece of two other exchange mergers. It is advising the London Stock Exchange in its deal with the Toronto Stock Exchange, and Singapore’s SGX in its acquisition of Australia’s ASX.)

Why bring in the additional help? It’s possible that NYSE Euronext was doing a favor to Goldman and Morgan, two of its most important customers. Beyond the advisory fees, the two firms would also receive credit in the all-important league tables.

But it’s also possible that NYSE Euronext may want the two firms around if a potential rival bidder, like the CME Group, emerges. Other banks have been studying ways to get a piece of the action, people briefed on the matter have told DealBook, though it’s unclear whether anything concrete will take shape.