This past April, General Motors was faced with bad news: its manufacturing plant in Venezuela had been seized by the country. GM quickly called the move “illegal” and vowed to take action to defend its rights.
So, what led to the seizure? Reuters took a deep dive into the history of GM Venezuela and two car dealers who ultimately made it happen. Kaled Kansao, the owner of two long-defunct GM dealerships, has been behind an ongoing legal battle with GM over stripped franchise rights.
GM maintains Kansao and his business partner failed to meet a monthly sales quota of 25 vehicles per month in the country, thus, the franchise agreement was terminated. The plant’s seizure was ultimately encouraged through private citizens, and not government authorities after Kansao’s lawsuit swayed the courts into slapping GM with fees, settlements, and what it called “absurd irregularities.”
The lawsuit also ordered GM to pay an “occupation fee” at its own facility while the seized plant was to be auctioned off by the government.
Venezuela has spiraled into political and economic turmoil and remains an unstable place to do business. GM previously went on the record to state it hopes it can return to the country, but without sound legal support, anything is up for grabs. Following the plant’s seizure, GM terminated its entire workforce.
Comments
Unless Maduro is taken down, any foreign business in Venezuela is in trouble. GM may be one of the first but others will be next.
GM, bring your plant to other Caribbean territories. I recommend Puerto Rico, which is a U.S. territory, and has the same Federal protection as the Stats, but no Federal taxes.
Raymond, Puerto Rico can use the jobs, too! A win-win for GM and for Puerto RIco.
Good points on Puerto Rico but I would think having to move all raw materials and the finished product by ship or airplane would be cost prohibitive.
Puerto Rico is in bankruptcy, but installing a GM manufacturing plant there would do nothing but good to one of OUR own territories, and could very well lead them to become the 51st state. Whenever you are producing Orange juice or Automobiles, your at the will of the government. But Cuba is another story.
Venezuela has generally only nationalized when it aided citizens and consumers. I remember they grabbed a French-based supermarket for price gouging.
Nationalisation only makes sense if the government can make a cheaper car by removing prifit motive which is the last concern during the current collapse.
Excellent point, and once done, it sends a firm and long lasting signal. Once you ‘nationalization’ a company, there is NO WAY any other company is going to step up to the plate to build or sell anything from that nation. and capitalization las a long memory.
Venezuela seizing General Motors auto plant is a notice for the world to stay out as drug lords (foreign and domestic) will now move in to take control of sections of the country and build a well equipped army to kill anyone who stands in their way then in a few years.. CNN’s Anthony Bourdain will do a special on how the crime riddle country still has great food (and hookers if you’re into that kind of thing).