GM Halts Venezuela Production as Plant Seized

The seizure of GM's only Venezula factory "was granted and enforced in total disregard of [GM's] right to due process," the company says.
Matthew HellerApril 20, 2017
GM Halts Venezuela Production as Plant Seized

Venezuela’s political and economic crisis has engulfed General Motors, which announced Thursday it had ceased operations in the country after authorities seized its only plant there.

The automaker said authorities conducted an “illegal judicial seizure” of the plant in Valencia, with other assets, including vehicles, being taken illegally from its facilities. Its local subsidiary, General Motors Venezolana, has operated since 1948 and employs 2,678 workers.

“The seizure was granted and enforced in total disregard of GMV’s right to due process, causing irreparable damage to the company,” GM said in a news release, adding that it would “vigorously take all legal actions, within and outside of Venezuela, to defend its rights.”

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As USA Today reports, Venezuela has been experiencing intense public protests against the government of President Nicolas Maduro amid high inflation and shortages of many basic goods and services. 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.”

GM’s revenue in South America has dropped from more than $13 billion in 2014 to $7.2 billion last year primarily because of falling sales in Brazil and Venezuela. South American sales represent only about 6% of total sales.

A GM spokeswoman declined to specify how many and what vehicles it sells in Venezuela. But financial market research firm Evercore ISI said the company was only expected to produce about 735 vehicles there in 2017.

Investors apparently shrugged off the plant seizure as GM shares rose 1.3% to $34.22 in trading Thursday. The Venezuelan government has previously seized assets belonging to U.S. companies including those of cleaning products maker Clorox in 2014.

“I would suspect GM is not the first and they’re not going to be the last because the government of Venezuela is desperate for any assets they can take,” Peter Quinter, chair of law firm GrayRobinson’s Customs and International Trade Law Group, told the Detroit Free Press. “It really is a vicious cycle they’re in.”