US auto major General Motors today announced it will ‘idle’ its manufacturing plant in Russia as part of a restructuring in the country, under which it will exit mass market segment with Chevrolet brand minimising its presence while Opel would exit the country this year.
As a result of the decision to change the business model in Russia, GM said it expects to record net special charges of up to approximately USD 600 million primarily in the first quarter of 2015.
General Motors will focus on the premium segment of the Russian market with Cadillac and US-built iconic Chevrolet products such as the Corvette, Camaro and Tahoe, the company said in a statement.
“The Chevrolet brand will minimise its presence in Russia and the Opel brand will leave the market by December 2015,” it added.
As part of the plans to change its business model in Russia, the company said The GM Auto plant in St. Petersburg will halt production by the middle of 2015.
“GM is planning to idle the plant,” it said, adding the contract assembly of Chevrolet vehicles at GAZ will be discontinued in 2015.
Commenting on the development, GM President Dan Ammann said: “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.”
Opel Group CEO Karl-Thomas Neumann said the brand doesn’t have the appropriate localisation level for important vehicles built in Russia and the market environment does not justify a major investment to further localise.
“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,” Neumann said.
By 2022, the company plans to raise its market share in total Europe to 8 per cent and to reach a profit margin of 5 per cent, the statement added.
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, the company said.
GM said the special charges that it would incur include sales incentives, dealer restructuring, contract cancellations and severance-related costs. Approximately USD 200 million of the net special charges will be non-cash expenses.
The announcement comes less than a month after GM had said it would shut its plant in Indonesia, where it had failed to take on Japanese rivals.