GM halting production in Russia
General Motors Co. said Thursday its Opel unit will halt production for nearly two months at a Russian plant because of low demand.
GM said it would halt production from March 23 through May 15 at its plant in St. Petersburg “due to a low demand and continued slowdown of the Russian automotive market... The employees will be paid for the shutdown period in accordance with Russian labor legislation.”
The collapse in the Russian currency amid the continued dispute over Ukraine is costing the auto industry hundreds of millions of dollars. GM sales in Russia fell about 28 percent in 2014, according to a European trade group.
In December, GM said it has raised prices, cut jobs and temporarily halted sales to dealers in Russia. Ford Motor Co. cut jobs and reduced the value of its investment in Russia. Volkswagen AG said the crisis has cost it more than $113 million.
Russian vehicle sales fell 10.3 percent in 2014 to 2.49 million. But sales rose in December by 2.4 percent as people rushed to spend rubles as the currency’s value sank.
Joerg Schreiber, chairman of the Association of European Businesses Automobile Manufacturers Committee, said earlier this month Russian auto sales are forecast to fall 24 percent in 2015 to 1.89 million vehicles, citing a “looming recession.”
Among foreign automakers, Jaguar Land Rover in December halted sales to dealers, while Audi said it is delaying deliveries and studying whether to raise prices. Toyota Europe says it’s looking at whether to adjust prices and production.
GM in December temporarily suspended sales to dealers and hiked prices.
In September, GM reduced production to one shift from two in its St. Petersburg plant and increased vehicle prices citing the volatility of the ruble, cutting about 500 jobs. GM builds the Opel Astra and Chevrolet Cruze cars at the plant.
The ruble has fallen more than 40 percent in recent weeks as the Russian government has tried to stabilize the currency — moves that have largely fueled more selling of the ruble.
Automakers are bracing for hundreds of millions of dollars in losses as vehicle sales have fallen in Russia amid western sanctions over the country’s takeover of the Crimea in Ukraine
GM’s business in Russia includes sales of Opel, Chevrolet and Cadillac vehicles. It also has a 50 percent joint venture that produces the Chevrolet Niva small SUV.
Ford in 2014 cut 950 jobs at two factories at its joint venture with OAO Sollers. In June, Ford wrote down the value of its investment in Russia by $329 million, the full amount at which it had valued its investment. Ford formed the venture in October 2011 that it valued at $367 million.
The company said in December it has raised prices this year by an average of 5 percent. Ford hasn’t stopped car sales to dealers.
Ford sales in Russia are down about 40 percent to 56,800 as of the end of November compared to the same period last year.