Amid the Russian Financial Crisis which resulted in the collapse of the Ruble value, General Motors has announced some drastic changes in its business model in the troubled nation.
“This change in our business model in Russia is part of our global strategy to ensure long-term sustainability in markets where we operate. This decision avoids significant investment into a market that has very challenging long-term prospects.” said GM President Dan Ammann.
The changes include Opel’s exit from Russia by the end of this year and Chevrolet will minimise its presence, concentrating only on its premium models like the Corvette, Camaro and Tahoe.
“We do not have the appropriate localisation level for important vehicles built in Russia and the market environment does not justify a major investment to further localise.” said Opel Group CEO Karl-Thomas Neumann.
GM also said that its auto plant in St. Petersburg will halt production by the middle of this year and be put on idle, while contract assembly at GAZ (Gorkovsky Avtomobilny Zavod) will be discontinued.
However, the GM-AVTOVAZ joint venture is said to continue producing the Chevrolet Niva and Cadillac to be set up for growth and prepares for numerous product introductions.
“We can assure our customers that we will continue to provide warranty, parts and services for their Chevrolet and Opel vehicles. We want to thank our customers and dealers for their loyalty to the Chevrolet and Opel brands,” Neumann added.
General Motors today announced plans to change its business model in Russia. GM will focus on the premium segment of the Russian market with Cadillac and U.S.-built iconic Chevrolet products such as the Corvette, Camaro and Tahoe. The Chevrolet brand will minimize its presence in Russia and the Opel brand will leave the market by December 2015.
“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.”
Opel Group CEO Karl-Thomas Neumann said, “We do not have the appropriate localization level for important vehicles built in Russia and the market environment does not justify a major investment to further localize.”
The GM Auto plant in St. Petersburg will halt production by the middle of 2015. GM is planning to idle the plant. Furthermore, the contract assembly of Chevrolet vehicles at GAZ will be discontinued in 2015.
The GM-AVTOVAZ joint venture will continue to build and market the current generation Chevrolet NIVA. GM’s global luxury brand Cadillac will be set up for growth in Russia over the next several years as it prepares for numerous product introductions.
Chevrolet and Opel will work closely with their dealer networks in Russia to define future steps while ensuring the company will honor its obligations to existing customers in the coming years. “We can assure our customers that we will continue to provide warranty, parts and services for their Chevrolet and Opel vehicles. We want to thank our customers and dealers for their loyalty to the Chevrolet and Opel brands,” said Neumann.
“We had to take decisive action in Russia to protect our business. We confirm our outlook to return the European business to profitability in 2016 and stick to our long-term goals as defined in our DRIVE!2022 strategy,” said Neumann. By 2022, the company plans to raise its market share in total Europe to 8 percent and to reach a profit margin of 5 percent.
As a result of the decision to change the business model in Russia, GM expects to record net special charges of up to approximately $600 million primarily in the first quarter of 2015. The special charges include sales incentives, dealer restructuring, contract cancellations and severance-related costs. Approximately $200 million of the net special charges will be non-cash expenses.
General Motors Co. (NYSE:GM, TSX: GMM) and its partners produce vehicles in 30 countries, and the company has leadership positions in the world’s largest and fastest-growing automotive markets. GM, its subsidiaries and joint venture entities sell vehicles under the Chevrolet, Cadillac, Baojun, Buick, GMC, Holden, Jiefang, Opel, Vauxhall and Wuling brands. More information on the company and its subsidiaries, including OnStar, a global leader in vehicle safety, security and information services, can be found at http://www.gm.com.