Chinese machinery maker Tengzhong is still working to close a deal with General Motors Co GM.UL to buy the U.S. automaker's Hummer brand after a regulatory setback, Chinese media reported on Monday.

GM is selling its Opel, Saab, Saturn and Hummer brands as well as closing down its 83-year-old Pontiac division as it strips back operations in the face of the sector's worst ever downturn.

China's Ministry of Commerce, which must approve the Hummer acquisition, had turned back the application because it was lacking detail, the Legal Evening News reported.

We are still trying hard, an unnamed spokesman for Tengzhong was quoted as saying in response by China News Service.

The deal would mark the first major Chinese acquisition of a distressed U.S. auto asset during the current economic downturn.

Sichuan Tengzhong Heavy Industrial Machinery, a little-known firm based in land-locked southwest China, raised eyebrows when the deal for the premium off-road Hummer brand came to light three months ago.

It was not GM's only surprise move, however, with tiny Swedish supercar maker Koenigsegg now in talks to buy Saab.

Swedish State Secretary Joran Hagglund told Reuters on Monday that Koenigsegg had presented a new plan for financing the deal.

German Economy Minister Karl-Theodor zu Guttenberg said on Monday he hoped GM's board would make a clear decision on the future of Opel when it meets on Tuesday.

The German government has come out strongly in favor of Canadian auto parts group Magna's bid for Opel.

Tengzhong's bid for Hummer requires approval in China from both the commerce ministry and the National Development and Reform Commission, a powerful planning agency.

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

Opposition has quietened 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.

GM and Tengzhong have said they will not disclose the financial terms of the deal.

Bankers familiar with the situation have said Hummer could fetch about $100 million in cash in addition to other commitments -- far less than the $500 million GM had expected Hummer to bring when it went on a sale in June 2008.

(Reporting by Simon Rabinovitch; Editing by Jason Neely)

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