UPDATE 4-GM to shut Russian plant as sales slide

* GM to shut St Petersburg factory

* To take $600 million charge on Russian operations

* Russian car sales to fall as much as 35 pct this year -PwC

(Adds background on automakers’ troubles in emerging markets,
details of GM cuts in Russia, comments by Russian officials)

By Gleb Stolyarov and Maria Kiselyova

MOSCOW, March 18 (Reuters) – General Motors Co will
shut a Russian factory and wind down its Opel brand in the
country, taking a $600 million charge as it restructures to cope
with a prolonged slump in the once-promising market, the U.S.
carmaker said on Wednesday.

After several years of growth in excess of 10 percent, car
sales in Russia shrank in 2014 as the economy weakened, battered
by Western sanctions over the Ukraine crisis and sliding oil
prices. The tumbling value of the rouble has caused consumers to
pull back on large purchases, and raised the cost to GM and
other manufacturers of importing parts.

GM’s retrenchment in Russia is the latest in a series of
moves by global automakers to scale back money-losing bets on
emerging markets that have failed to live up to the bullish
expectations industry executives subscribed to earlier in the

Last month, GM said it would close a factory in Indonesia
and scale back operations in Thailand. Ford
Motor Co took an $800 million charge earlier this year to
restructure troubled operations in Venezuela.

GM said it would stop production by the middle of 2015 at
its St. Petersburg plant which makes the Chevrolet Cruze, Opel
Astra and Chevrolet Trailblazer models. The idling of the plant
will mean the loss of 1,000 jobs.

GM also will wind down the Opel brand in Russia by December,
and stop assembling mass-market Chevrolet cars at GAZ,
a Russian vehicle factory, to concentrate on premium car sales.
GM said it would continue to assemble the current generation of
Chevrolet Niva sport utility vehicles at a joint venture with
Russian automaker Avtovaz OAO.

“This decision avoids significant investment into a market
that has very challenging long-term prospects,” GM President Dan
Ammann said in a statement.

Just four years ago, GM said its Russian operations were
gearing up to expand production capacity to 350,000 vehicles a
year, and called Russia “an important strategic market.”


Going forward, GM said it will focus on the premium segment
in Russia, which has held up better than the mass market, with
Cadillac and some U.S.-built Chevrolet cars. Russia accounted
for 1.9 percent of GM’s global sales in 2014, down from 2.6
percent in 2013. The automaker does not break out financial
results for the country, but consolidates Russian operations
with its GM Europe unit.

GM Chief Executive Mary Barra has said Opel would regain
profitability by 2016, and the company reaffirmed that forecast
on Wednesday. The charge will primarily hit results for this
year’s first quarter, GM said.

Volatility in Russia has hit other automakers. Ford has cut
jobs at its joint venture factory in Russia, and Nissan Motor Co
Ltd earlier this week said it would halt production at
its St. Petersburg plant for 16 days.

Russia’s Economy Ministry said late on Wednesday that no
other foreign car company that operates an assembly line in
Russia has said it would leave the market, according to RIA news

“The Ministry of Economic Development of Russia cannot agree
with the assessment of the market by one individual company,”
RIA cited the ministry’s spokeswoman as saying.

Russian industry and trade ministry officials, quoted by
RIA, said GM suffered because it imported more than half of the
parts for its cars. Renault-Nissan and Volkswagen AG
source about two-thirds of car parts within Russia for the cars
they assemble there.


The Russian car market is forecast to shrink by up to 35
percent in 2015 according to PricewaterhouseCoopers.
. The Russian Economy Ministry said it expects
the domestic car market to return to growth in 2016.

But analysts say Russia is in for tough times.

“At least 70 percent of cars currently sold in Russia are
sold at a loss. Auto groups only stay in this market to protect
their share in anticipation of growth,” said Oleg Datskiv,
general director of online automobile portal Auto-dealer.ru.

Opel sold 912 vehicles in Russia in February, an 86 percent
plunge from year-ago levels, said a spokesman at Opel’s base in
the German town of Ruesselsheim.

The Opel Astra has a starting price of about 800,000 roubles
($13,000) in Russia.

(Additional reporting by Andreas Cremer in Berlin, Ben Klayman
and Joe White in Detroit and Lidia Kelly in Moscow; Editing by
Elizabeth Piper Elaine Hardcastle and Matthew Lewis)

Source: Newsjyoti

Leave a Reply