GM to Shut Russian Factory; Opel Will Stop Selling There

DETROIT (Detroit Free Press/TNS) -

General Motors will stop production at its St. Petersburg, Russia, factory by the middle of this year and halt production of Chevrolet cars through its joint venture with GAZ by the end of 2015.

The company also will wind down its German-based Opel brand, which will stop selling cars in Russia by the end of this year.

The moves drastically reduce GM’s presence in Russia and will result in about $600 million in special charges against first-quarter earnings, the company said Wednesday.

“This change in our business model in Russia is part of our global strategy to ensure long-term sustainability in markets where we operate,” said GM President Dan Ammann. “This decision avoids significant investment into a market that has very challenging long-term prospects.”

The moves show GM has run out of patience with a market that was expected to be one of the world’s fastest-growing car markets.

But Russia’s economic tailspin has accelerated since the Russian invasion of Crimea and the ongoing conflict with Ukraine.

“We had to take decisive action to protect our business,” said Karl-Thomas Neumann, Opel Group CEO. “We can assure our customers that we will continue to provide warranty, parts and services for their Chevrolet and Opel vehicles.”

GM’s joint venture with Autovaz will continue to build the Chevrolet Niva. Cadillac will compete in Russia as it launches several new models in the next few years.

“Give (GM CEO) Mary (Barra) credit for being willing to say, ‘We don’t think General Motors is going to make enough money to be willing to stay in Russia,’ ” said Erik Gordon, professor at the University of Michigan Ross School of Business. “In the past, GM used to dither for years before making a decision like this.”

GM has a goal of turning a profit next year in its European business, where it has lost money in every year since 1999. Its longer-term goal is to raise its market share in Europe to 8 percent — from 6.3 percent in the first two months of 2015 — and make a before-tax profit margin of 5 percent.