General Motors changes its business model in Russia
The multinational closes the Opel factory in St. Petersburg to focus efforts on their high-end vehicles.
On March 18 we read the surprising news of the closure of the Opel factory (GM group) in Russia. A blow, not only for the company, its employees (more than 800) but also for many component suppliers factories. The official position of the Russian government, in addition to regret, without much emphasis, the bad effects of the decision, focused on explanations as «GM has not been able to adapt to market conditions» and adds «the hole created by Opel closure will be covered by another manufacturer».
The company surprised with an original statement explaining saying that the «change of business model to justify the closure of the plant» and then indicate «that the fact that having good project and great ideas arise, it is not often, guarantee of success». Clearly the economic crisis in Russia with the collapse of the ruble, the mutual Western-Russian sanctions have not helped at all the sales of US giant. Cars sales fell 20% in Russia, but in the case of GM, the decline was even more pronounced.
The same day that this news was known, Vladimir Putin met in a Russian business summit and promised a tax amnesty (almost regardless of the source of funds) for them to return capital to Russia. The fact is that part of a tax amnesty for the investment reaches this country has to offer a favorable business climate, stable legal framework, ease of permitting, low and predictable tax…
GM’s efforts will focus on that range of vehicles that can offer more performance right now, sales of Corvette, Camaro, Tahoe and Cadillac. In fact, Russia is the fourth largest market for Cadillac. We wrote a few weeks ago in Porsche was optimistic the 2015 campaign in Russia and it seems that this optimism extends to other manufacturers such as Jaguar or BMW.
However, analysts agree that the output of Russia can be precipitated, no wonder it is considered that once the economy recovers minimally, Russia may overtake Germany as the main European market sector. We’ll see if time gives or takes reason on GM´s decision.
There was just been released the news of Ladoga bankruptcy, one of the leading manufacturers of premium vodka in Russia. Founded in 1995, the company produced in 2013 more than 20 million liters, and got more than USD 10 million profits that year. Another very bad news for the economy of St. Petersburg.