Tags: General Motors | Russia | plant closing | ruble

GM Shutting Down Russian Car Plant as Ruble Plunges

GM Shutting Down Russian Car Plant as Ruble Plunges
(Bill Pugliano/Getty Images)

Wednesday, 25 March 2015 12:20 PM

General Motors is closing its car manufacturing plant in St. Petersburg, Russia as car sales face a steep 35 percent decline this year.

NPR reported that GM opened the plant seven years ago when the car market was booming and Russians had money burning a hole in their pockets.

But in the wake of Western sanctions against President Vladimir Putin's regime following the annexation of Ukraine's Crimea last year, the value of the Russian ruble has plunged 40 percent.

The fallout has resulted in Russians losing a large chunk of their buying power, according to Mark Adomanis, an analyst who has written for Forbes.

"Given what Russians' average incomes are, big-ticket items like cars have never been easy to afford," he told NPR. "But if all of a sudden, you make that car 50 percent more expensive, 30 percent more expensive, it's just beyond people's reach."

Adomanis noted that GM incurred greater costs than other automakers in Russia because the company imported many car parts, instead of manufacturing them within the country.

"The automobile industry is one of the very few where they did a good job of attracting foreign investment, and to see one of the few industries where they have some real success stories to tell — to see people slashing production or in GM's case, pulling out entirely — is very worrying."

Pyotr Letkeman, chairman of the union shop committee, says workers feel they are being punished for GM management's mistakes.

"As far back as 2013, it was clear that sales were declining in Russia," Letkeman told NPR. "GM had very little localization of production in Russia, so foreign parts became expensive when the ruble lost value. GM couldn't compete.

"It's very painful. People are calling me, asking 'what should I do? How will I feed my kids? How will I pay my mortgage?' "

The GM plant closure will immediately end the production of Chevrolets and wind down the manufacture of its German-designed Opel brand, according to NPR, adding that the automaker will take a $600 million charge to pay for restructuring.

The Russian car market is in freefall, adds the report, with Volkswagen planning to lay off workers and reduce shifts at a plant in central Russia. The Korean company SsangYong, meanwhile, has stopped shipping cars to Russia because they are not selling there.

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General Motors is closing its car manufacturing plant in St. Petersburg, Russia as car sales face a steep 35 percent decline this year.
General Motors, Russia, plant closing, ruble
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2015-20-25
Wednesday, 25 March 2015 12:20 PM
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