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-2013 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.