DETROIT – General Motors today announced plans to change its business model in Russia to 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.
“This change in our business model in Russia is part of our global strategy to ensure long-term sustainability in markets where we operate,” says GM President Dan Ammann. “This decision avoids significant investment into a market that has very challenging long-term prospects.”
GM’s factory in St. Petersburg, which employs 1,000, will “halt production by the middle of 2015,” the company said. It is too early to say how many jobs will be lost.
The St. Petersburg assembly plant is GM’s only fully owned production facility in Russia and opened in late 2008 amid much fanfare at a time when foreign automakers were crowding into a booming market. The plant cost $300 million and has a capacity of 70,000 cars a year.
Production of Chevrolets under license by Russian firm GAZ will also end this year, while GM’s joint venture with Russia’s Avtovaz producing the Chevrolet Niva basic SUV will continue.
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,” says Opel Group CEO Karl-Thomas 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, GM expects to record net special charges of up to approximately $600 million primarily in the first quarter this year. The special charges include sales incentives, dealer restructuring, contract cancelations and severance-related costs. Approximately $200 million of the net special charges will be non-cash expenses.
The Associated Press contributed to this report.