Tengzhong may finalize Hummer deal next week: source

* Regulator to render decision after agreement finalized

By Fang Yan and Edmund Klamann

SHANGHAI (Reuters) - China's Tengzhong may finalize a deal with General Motors as early as NEXT (NXT.LO)week to acquire the U.S. automaker's Hummer brand, a source familiar with the deal said on Friday.

The deal would mark the first major Chinese acquisition of a distressed U.S. auto asset amid a sharper than expected industry downturn. Chinese regulators will decide whether or not to approve the plans after the deal is finalized, the source said.

Sichuan Tengzhong Heavy Industrial Machinery has been in detailed negotiations with GM since it announced a tentative plan in June to take over the rights to the premium off-road Hummer brand from its U.S. owner.

"Tengzhong executives have been traveling between the U.S. and China in the past months and more will arrive in Detroit soon," said the source, who was not authorized to speak to the media about the deal due to its sensitive nature.

"If there are no big surprises, an agreement could be finalized next week," the source added.

Tengzhong declined to comment. A GM spokeswoman in China could not immediately be reached for comment.

Tengzhong is expected to maintain Hummer's existing senior management and operational team as it previously promised, the source said.

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

OVERSEAS ATTEMPTS

Commercial terms of the transaction were unknown, but an article posted on Chinese internet portal www.163.com earlier this week put the price tag at $170 million, much less than the $500 million that GM had sought last year although in line with market expectations between $150 million to $200 million.

Tengzhong, a little-known machinery maker based in land-locked southwest China, raised eyebrows when the Hummer deal first came to light nearly three months ago.

Tengzhong's lack of experience in the car industry stirred doubts while state media said the Chinese government would likely harbor objections to taking over a gas-guzzling SUV.

However, opposing voices have quieted down in recent weeks after China's commerce ministry sounded a more positive note on the deal, saying Tengzhong's move was normal for a company seeking to take advantage of the global downturn.

China's National Development and Reform Commission and the commerce ministry, which have authority over the deal, are reviewing documents submitted by Tengzhong, state-owned Xinhua news agency said earlier this week.

Chinese auto firms have attempted several overseas acquisitions in recent years with mixed results.

SAIC Motor Corp <600104.SS>, China's biggest automaker, has successfully launched a mid-range sedan line, the Roewe, developed on the basis of technologies acquired from defunct British car maker MG Rover.

But a huge write-off for its 51 percent holding in loss-making South Korean unit Ssangyong Motor <003620.KS>, which has been in court receivership since February, dented its bottom line in 2008 and the first six months of this year.

Beijing Automotive Industry Holding Corp failed to get into the final race for GM's Opel unit, although it submitted a bid along with Belgian investment group FHJ International and a consortium led by Canada's Magna International .

(Reporting by Fang Yan and Edmund Klamann)