GM says Venezuela has seized its car plant
by Alanna Petroff - April 20, 2017
General Motors says it will immediately halt operations in Venezuela after its plant in the country was unexpectedly seized by authorities.
GM (GM) described the takeover as an "illegal judicial seizure of its assets."
The automaker said the seizure showed a "total disregard" of its legal rights. It said that authorities had removed assets including cars from company facilities.
"[GM] strongly rejects the arbitrary measures taken by the authorities and will vigorously take all legal actions, within and outside of Venezuela, to defend its rights," it said in a statement.
Authorities in Venezuela, which is mired in a severe economic crisis, did not respond to requests for comment.
It was not immediately clear why authorities seized the GM plant. Huge swaths of Venezuela's economy have been nationalized in the years since former President Hugo Chavez rose to power. Under Chavez, who took office in 1999, the state took control of private oil, telecommunications, energy and cement businesses.
President Nicolas Maduro has continued the tradition, while blaming the United States and its companies for Venezuela's economic and political problems.
"Government decision making is increasingly incoherent. It's difficult to understand the rationale," said Nicolas Watson, head of Latin American research at Teneo Intelligence.
Automakers in the country have struggled because they've been unable to access U.S. dollars to import parts, said Watson.
The GM plant in Valencia employs nearly 2,700 workers, but stopped producing cars in 2015
and has only been selling spare parts since then, a company spokesperson said.
GM said it would make "separation payments" to its workers.
Venezuela is in crisis mode: The country's economy shrank by 18% in 2016 -- its third consecutive year of recession. Unemployment is set to surpass 25%, and its people have suffered from widespread shortages of food and medicine.
Hyperinflation has wiped out the value of its currency, the bolivar. The price of consumer goods has skyrocketed.
Large-scale protests erupted in recent weeks after...
... A slew of global firms have pulled out of the country or been forced to halt operations as a result of government interference or moves to put key sectors of the economy under state control.
ExxonMobil (XOM) pulled the plug on its operations in Venezuela in 2007 after former President Hugo Chavez attempted to nationalize one of its projects. The oil producer then took the government to court.
In 2016, Kleenex maker Kimberly-Clark (KMB) suspended its operations in Venezuela, citing the country's "rapidly escalating inflation" and the "continued deterioration of economic and business conditions."
The government called the closure illegal. It took over operations at the facility days later, according to state-run media.
Related: GM isn't the only company under siege in Venezuela (+ video)
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background / note the date ...& confusion: Was the plant mothballed?
Ford halting Venezuela production until April
Reuters Business News | Tue Dec 20, 2016
Ford Motor Co (F.N) halted auto production in Venezuela last week and will not resume it until April, a company executive said on Tuesday, in another blow to the crisis-wracked country's manufacturing sector.
"It is a measure to adjust production to demand in the country," Lyle Watters, Ford's president for South America, told reporters at an event in São Paulo, adding that the plant affected by the shutdown employs 2,000 workers.
Watters said the production freeze would not affect Ford's consolidated results as operations in Venezuela are reported separately. Beginning in the first quarter of this year, Venezuela became the only wholly owned Ford unit with operating results that are excluded from the full company's income statement.
In January 2015, Ford took a charge related to its Venezuelan operations that cut fourth-quarter net profit by $700 million. Ford is the only automaker still mass producing cars in Venezuela, even on a limited scale.
Vehicle production in recession-hit Venezuela is less than 8 cars a day, according to figures provided by the national automakers organization Cavenez. Ford produced 2,253 units out of a paltry national total of 2,768 in the year through November.
It takes less than two days for Ford at one of its larger U.S. plants to make as many vehicles as the company has made in Venezuela so far in 2016.
Ford in 2014 halted production for about a month due to a lack of foreign currency to import parts for assembly.
In mid-2015, Ford's major U.S. rival, General Motors Co (GM.N), stopped making vehicles in Venezuela altogether. GM had one plant in Venezuela.