This Is Why GM Is Investing So Heavily In Russia
8
The Eurozone economic crisis is nothing new, and neither are GM’s problems in the region — where the automaker lost $14 billion over the last 12 years. The General is addressing its end of the morass head-on across multiple fronts. That much we already knew. But get this: currently, Russia is the seventh-largest automobile market in the world. By 2015, it is projected to become the largest. And GM is investing heavily in the country, which has a population of 140 million as well as a GDP of $10,440 per capita, to meet the forthcoming demand.
Perhaps this illustrates the opportunity more comprehensively: “Russia today has about 100 cars per 1,000 people. The U.S. is about 812 and Germany is 628 cars per 1,000 people,” said GM CEO Dan Akerson after receiving the International Executive of the Year award from the Executives’ Club in Chicago.
To take full advantage of Russia’s growing auto market, The General is investing $1 billion over the next five years into the country by expanding capacity to 350,000 units. At the end of June, the automaker celebrated the groundbreaking of the expansion of its wholly-owned plant in St. Petersburg (GM Auto), a move that will more than double its plant capacity to 230,000 vehicles annually while expanding the plant’s workforce by 1,500 to 4,000 workers — all by 2015.
“Russia is a really interesting country. I mean, it has got some issues to manage,” Akerson said while adding that he met with Russian President Vladimir Putin while he was in the country. “That was interesting,” he jested.
As far as Europe goes: “I’m cautiously optimistic that we are making more progress than probably anybody else because we are viewed as the most aggressive,” Akerson said.
The GM Authority Take
So, take the fact that Chevrolet needs to significantly grow its international presence, add in the looming expansion of the Russian auto market — and you have the perfect storm of a chance to increase sales outside the traditional North American markets.
Google+
Comrade please see former Soviet Union today in your Chevrolet.
Everyone laughed at GM when it entered China, thought it was nuts to buy Daewoo.
Both decisions have proven extremely wise even prophetic with hindsight.
This is another one of those bold ideas.
Yes, great idea though I would caution GM from investing too much right now, otherwise it could result in significant short to mid term losses. GM should just do the same thing it did in China, establish a presence thats could be quickly expanded if necessary, but not one that was a big drain on resources.
I would caution GM from replicating their operations in China. Though everything is rosy and “nice” on the surface, the Chinese business relationships are forced and messy — and GM doesn’t get 100% of the profits generated in the country thanks to the necessary business structure. Even so, the company is building its own Cadillac plant that will only be ready in three years, leading me to believe that expansion can’t be had as quickly as needed. At the least, GM will have full control of the GM Auto plant in St. Pete… but I do understand the cautionary angle.
By saying the China approach, I was referring to GMs early start in China that let them establish themselves as a market leader in China while other companies are tripping over themselves to catch a plane to China, not their actual business relations. GM should learn from the mistakes they made in China and not do them in Rusiia. And I think Putin, oh i mean Russia, is more friendly to foreign automakers than China is.
Ah got it. Agreed on all accounts there.
Good move. NO UAW there.
I love the way they speak a language.