GM to Change Business Model in Russia

• Focus on Cadillac and iconic Chevrolet vehicles
• Wind down Opel brand and sale of mainstream Chevrolet cars
• Idle GM Auto manufacturing facility in St. Petersburg
• Part of GM’s strategy to ensure long-term sustainability in global markets

General Motors today announced plans to change its business model in Russia. GM will 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 2015. 

“This change in our business model in Russia is part of our global strategy to ensure long-term sustainability in markets where we operate,” said GM President Dan Ammann. “This decision avoids significant investment into a market that has very challenging long-term prospects.”

Opel Group CEO Dr. Karl-Thomas Neumann said, “We do not have the appropriate localization level for important vehicles built in Russia and the market environment does not justify a major investment to further localize.”

The GM Auto plant in St. Petersburg will halt production by the middle of 2015. GM is planning to idle the plant. Furthermore, the contract assembly of Chevrolet vehicles at GAZ will be discontinued in 2015.

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,” said Dr. 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 Dr. 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 in Russia, GM expects to record net special charges of up to approximately $600 million primarily in the first quarter of 2015. The special charges include sales incentives, dealer restructuring, contract cancellations and severance related costs. Approximately $200 million of the net special charges will be non-cash expenses.

General Motors Enters New Era in Russia

Breaks ground for St. Petersburg plant expansion

General Motors broke ground today for the expansion of GM Auto, its wholly owned manufacturing facility in St. Petersburg, Russia. It will more than double GM Auto’s annual production capacity from the current 98,000 vehicles to 230,000 vehicles by 2015.

The project is the most significant development for GM’s Russian operations since GM Auto opened in 2008.

General Motors Chairman and CEO Dan Akerson greets workers at GM Auto in St. Petersburg, Russia

GM Auto’s expansion is part of an historic partnership formed last year with the Russian Federal Ministry of Economic Development that will lead to GM investing US $1 billion in its Russian operations over the next five years. The investment will also support the increase of production at the GM-AVTOVAZ joint venture in Togliatti, Russia, resulting in combined annual Russian production capacity for GM of 350,000 vehicles.

General Motors Chairman and CEO Dan Akerson (on left) greets former U.S. Secretary of State Henry Kissinger and U.S. Ambassador to Russia Michael McFaul (on right)

GM Chairman and Chief Executive Officer Dan Akerson, Russian Federal Deputy Minister Alexey Rakhmanov, U.S. Ambassador to Russia Michael McFaul, and former U.S. Secretary of State Dr. Henry Kissinger joined senior representatives from GM Russia and GM Auto employees at today’s celebration.

When the expansion is complete, employment at the facility will increase from 2,500 to 4,000 people. They will manufacture Chevrolet and Opel models for the Russian market. Among the additional vehicles that will be produced at GM Auto is the new Opel Astra sedan, which will make its worldwide debut at the Moscow International Motor Show in August.

“General Motors is embarking on a new era in Russia, one of the world’s fastest-growing vehicle markets, as part of our strategy to build where we sell,” said Akerson. “The global vehicles that we produce and the manufacturing systems that we are putting in place are creating long-term benefits for Russia’s automotive industry, its supply base and its economy.

General Motors Chairman and CEO Dan Akerson on Friday, June 22, 2012, before the groundbreaking for the expansion of GM Auto, its wholly owned manufacturing facility in St. Petersburg, Russia

“Our growing investment is the strongest possible endorsement by General Motors of our intent to make Russia a significant part of our international operations. Our vision in Russia, as in all of the other markets where we do business, is to design, build and sell the world’s best vehicles,” he said.

During his three-day visit to Russia, Akerson also addressed business leaders and media at the St. Petersburg International Economic Forum on June 22. He discussed the importance of investing first in products and technology, being well-positioned for profitable growth and building strong brands that connect with customers worldwide.