General Motors (GM), the giant American carmaker, has reached an agreement to sell its Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery, of China, in a deal thought to be worth $150 million (£95 million).

The long-anticipated sale marks the end of an era for a quintessentially American vehicle, which famously achieves only 16 miles a gallon and measures more than six feet wide.

The robust vehicle was developed as the Humvee for military use, but the civilian Hummer version became popular in the 1990s, when oil prices were low. Sales peaked at 71,000 in 2006, but demand declined as oil prices soared. When the recession hit last year, production was scaled down before stopping altogether in April.

Only 8,193 Hummers were sold in the United States in the first nine months of this year, 64 per cent fewer than a year earlier.

For the Chinese buyers, the deal represents the first acquisition of a distressed asset from the American car industry and a calculated bet that it can revive a tainted brand.

The new owners are expected to invest heavily in expanding the brand with a view to establishing a manufacturing facility in China, possibly to produce a cheap mass-market version of the Hummer for the local market.

A spokeswoman for Tengzhong said: “It’s possible we could have an additional manufacturing facility in China if there is a market for the Hummer there.” She said that Tengzhong, an industrial manufacturer, did not intend to become a carmaker itself and regarded the deal as an investment.

Tengzhong will hold an 80 per cent stake in Hummer. The remaining 20 per cent will be held by Suolang Duoji, a private entrepreneur with mining holdings in Hong Kong, who indirectly owns a big stake in Tengzhong through an investment company called Sichuan Huatong Investment Holding Co.

Under the terms of the deal, production of the Hummer will remain in the United States at least until June 2011, with an optional one-year extension until June 2012. This will secure more than 3,000 American jobs — 100 at Hummer and 1,000 at manufacturing plants operated by GM and AM General, with the remainder at dealerships. Tengzhong will take over franchise agreements with Hummer’s 153 dealers in the US and 231 dealers in international markets.

The companies said in the statement that the existing management team, including James Taylor, the chief executive, would remain.

“We are fortunate to have a partner who understands and recognises the importance of continuing investment in Hummer’s heritage as a US-based and branded company with a view toward capitalising on global opportunities,” Mr Taylor said.

For GM, the sale, which is subject to regulatory approvals, is the latest step in a $50 billion US government-sponsored restructuring plan, which also involves the disposal of the carmaker’s Saab, Opel and Saturn operations.

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