General Motors has announced major changes to its business model in Russia, including:
- The complete withdrawal of the Opel brand by December 2015
- The minimization of the Chevrolet brand to “iconic” products such as the Camaro, Corvette and Tahoe, with the withdrawal of mainstream Chevrolet vehicles by December 2015
- A new focus on the luxury Cadillac brand in the premium segment
- Halting production at its manufacturing plant in St. Petersburg by mid-2015, and then idling the plant
- Discontinuing contract assembly of Chevrolet vehicles at GAZ in 2015
The move follows a late-2013Â decision to discontinue the Chevrolet brand in Europe.
“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 changes don’t seem to affect the GM-AVTOVAZ joint venture, which will continue to build and market the current generation Chevrolet NIVA.
GM is presenting the moves as setting up GM’s global luxury brand, Cadillac, for growth in Russia over the next several years “as it prepares for numerous product introductions.”
“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.
In winding down Chevy and Opel operations, GN will work closely with its dealer networks in Russia to structure 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.
Financially, GM expects to record net special charges of up to approximately $600 million primarily in the first quarter of 2015 as a result of the decision to change the business model in Russia, GM. The special charges are comprised of sales incentives, dealer restructuring, contract cancellations and severance related costs. Roughly $200 million of the net special charges will be non-cash expenses.
Comments
Clearly the Russian market is a basket case at the moment, but for years it has been predicted for great potential. I am assuming the only vehicles that will be imported have high enough margins to justify any duties required. I am also assuming that a local content requirement is what eliminates the more basic Chevrolet models from continuing. But I thought all Opels were imported, which should not involve much greater investment to continue this practice.
The point I am building to is that GM’s departure of mass market cars will not be forgotten by Russians when their economy recovers making it that much more difficult to re-enter the market later on. Additionally the premium GM brands will have a greater struggle as well with many consumers questioning how long they will last as well.
Sure this is a decisive act but could it not have been watered down a bit?
I agree this decision to all but leave such a large market is a little hasty. Yes the Russian economy is in ruins right now but that will change and it will recover.
The cost for GM to re-enter the market and regain their current market share when the Russian economy recovers will be much greater than the losses they will incur sticking it out now.
The Russian market is to important to basically abandon.
Astonishingly short-sighted call, given that Russia is GM’s third largest ‘European market’ after the UK and Germany. Within the next two years Russia will be on the rebound and GM won’t be there to pick up the baton and benefit!
All manufacturers (including BMW, Mercedes and Audi) are taking severe flak in this market at the present time … but they’re in it for the long haul. Ultimately Hyundai/Kia, VW, Ford and Toyota will benefit at GM’s expense!
As for Cadillac, 95% are sold in either Moscow or Saint Petersburg … hardly national exposure for GM in the world’s largest country!
Either take it on the chin GM for the medium term, or wave goodbye forever as there will be no easy or quick route back. Forget what the accountants are saying, rather understand the culture of the Russian people … they’re a long time making friends and they don’t forgive betrayal easily!
THINK GM!
Are they kidding???????????????????!!!!!!!!!!!!!!!!!!!!!!!!!! What is happening in their mind to take such bad decisions. Looking for present time while other automakers are looking to the future. Finally, old GM behavior and ideology still exist. How could people feel confident toward GM as they don’t know if tomorrow gm brand’s will still be here. One thing is sure, I don’t want to be a Chevy die hard in Russia. Hope that GM will go back and stay in Russia ( Chevrolet, Opel)
WTF?? Chevy sells pretty well in this huge market. And if things get normal, they would be there as a recognized brand. Seriously… WTF do these guys think they are doing??