GM halts operations in Venezuela after factory is seized

Paterniano Del Favero
Aprile 21, 2017

GM called the move an illegal judicial seizure of its assets. The Detroit automaker said vehicles and other property were "illegally taken from its facilities" as well. It will pursue legal recourse and is confident of getting justice, according to the AP report. The troubled Venezuelan economy has dragged down the auto industry for several years, with GM recently reporting that its operations "continue to be negatively impacted by economic recession and political instability in the country".

The plant in the industrial city of Valencia was confiscated Wednesday as anti-government protesters clashed with security forces and pro-government groups in a country battered by economic troubles, including food shortages and triple-digit inflation.

GM said that the takeover was made through a court order and that as of Thursday, the government had not responded to GM's decision to halt operations.

GM, though, hasn't produced a single vehicle at its plant in the industrial city of Valencia since 2015.

Maduro and his predecessor, the late Hugo Chavez, have seized the assets of foreign companies on several occasions, including a "temporary" takeover of two plants owned by US company Clorox in 2014. Last July, the government said it would take over a factory belonging to Kimberly-Clark Corp. after the American personal care giant said it was halting manufacturing because materials weren't available in Venezuela. The company's suppliers represent more than half the auto parts market there, according to GM.

Almost all vehicles built in Venezuela in the first two months this year were assembled by Toyota Motor Corp 7203.T , which said on Thursday that its plant was operating normally.

As a outcome, GMV announces the immediate cessation of its operations in the country, and ensures (as far as the authorities permit) payment of the employees' separation benefits arising from the termination of the employment relationships due to causes beyond the parties' control. The move has drawn condemnation from GM, which has halted operations, and from Secretary of State Rex Tillerson, who has accused Nicolas Maduro's government of "violating its own constitution".

General Motors' announcement comes as Venezuela's opposition looks to keep up pressure on President Nicolas Maduro, taking to the streets again Thursday after three people were killed and hundreds arrested in the biggest anti-government demonstrations in years.

In early 2015, Ford Motor Co. wrote off its investment in Venezuela when it took an $800 million pre-tax write-down. The company said on Thursday it was not producing vehicles in Venezuela.

Venezuelan officials offered no explanation for the seizure of the GM facility.

South American operations, which include Venezuela, account for about 6 percent GM's total sales.

The company recently said that its South America region "remains challenged from macro-economic and political standpoints".

Shares of General Motors Co. rose 18 cents $33.97 in morning trading.

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