Business

GM operations in Venezuela are seized as protests swell

Worker walks at the General Motors' plant in Valencia, Venezuela, Thursday, April 20, 2017. The company announced that it was shuttering operations in the country after authorities seized the factory on Wednesday. General Motors' announcement comes as Venezuela's opposition looks to keep up pressure on President Nicolas Maduro, taking to the streets again Thursday after three people were killed and hundreds arrested in the biggest anti-government demonstrations in years. (AP Photo/Juan Carlos Hernandez)
JUAN CARLOS HERNANDEZ/ASSOCIATED PRESS
Employees walked outside the General Motors factory in Valencia, Venezuela, after the government took it over.

NEW YORK — General Motors said Thursday that Venezuelan authorities had seized its vehicle assembly plant in the country, adding to the chaos in the already-struggling auto industry there.

GM, America’s largest automaker, said it was forced to cease operations in Venezuela because of an “illegal judicial seizure of its assets” and would lay off its 2,700 workers there.

The move came amid violent street protests against the government of President Nicolás Maduro and a deepening economic crisis fueled by the country’s heavy foreign debt and the retreat of world oil prices, slashing Venezuela’s main source of income.

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In a statement, GM’s Venezuelan division said that it was ceasing operations after its plant in Valencia in the state of Carabobo, was “unexpectedly taken by the public authorities, preventing normal operations.” It said the government had taken other assets of the company, including vehicles, from the plant.

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The particulars of the dispute were murky. Venezuelan news reports said the seizure stemmed from a lawsuit that dated from the early 2000s involving a company in the western city of Maracaibo.

But Enrique Tahan, head of corporate and government relations for GM in Venezuela, said on Thursday that for the last 42 days, the plant had been shut down by an aggressive takeover by members of one of its unions.

GM had asked the government to help the company retake control of the plant, he said, but instead, the government took over the facility itself.

“In other words, we are twice out of control of our plant,” Tahan said.

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Tahan said members of the union were able to enter the plant, but that no managers from the company were allowed by the government.

A GM spokeswoman, Dayna Hart, said the plant had not been producing cars for an extended time.

“GM strongly rejects the arbitrary measures taken by the authorities and will vigorously take all legal actions to defend its rights,” the company said.

Venezuela’s auto industry has nearly ground to a halt amid political instability, currency issues, and an economic collapse that has led to violent protests across the nation.

Other automakers, including Ford Motor Co. and Toyota, have closed their plants for several months at a time because of the low demand and an inability to obtain parts.

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The Venezuelan government has expropriated more than 1,400 private businesses since 1998, including construction, energy, and finance companies, according to the US State Department.

Former President Hugo Chávez engaged in high-stakes seizures against companies that did not cooperate with his policies, such as when he expropriated assets of Exxon Mobil after it refused to negotiate contracts in 2007. Maduro expropriated Clorox’s facilities after it said it was closing in 2014.

The situation has left many foreign companies debating whether to stay. Remaining in Venezuela means continued losses, while leaving the country would mean investing from scratch should government policies become more favorable.

A third option is known as “deconsolidation.” Under US accounting laws, a company may assign market value to a subsidiary’s assets and afterward consider it an investment rather than a separate operation. The move allows a firm to take a one-time charge but remain in Venezuela.

In the last two years, many companies have deconsolidated their Venezuelan operations, including the tire maker Goodyear, which took a $646 million charge for its Venezuelan operation last year. Bridgestone and Pirelli both announced similar measures that year, with write-offs of $360 million and $614 million.