General Motors, the largest US automaker and the third biggest in the world, announced recently it would shutter one of its Russian facilities and also wind down the Opel brand due to the prolonged sales protraction.
The US carmaker invested heavily in Russia, seeing it as one of the most promising emerging markets – even forecasted by analysts and executives as capable of overcoming Germany to be the No. 1 market in Europe. The situation reversed since 2013 when the first weaknesses of the economy emerged, but matter became catastrophic last year after Russia’s implication in the Ukraine crisis, subsequent western nations economic sanctions, a global drop in crude oil prices and the collapse of the local currency. After years of 10 percent or more of growth, the reverse caught global manufacturers implicated on the local market off guard, with the tumbling ruble putting pressure both on consumer demand and on the automakers – which had to adjust prices accordingly.
GM’s updated strategy for the country is only the latest in a massive series of strategy retrenchments as they try to scale down the losses and recover from wrong bets made on losing emerging markets- which ultimately failed to live up to the bullish expectations. The US carmaker will idle the St, Petersburg plant it uses to build the Chevrolet Cruze, Opel Astra and Chevrolet Trailblazer autos by the middle of 2015, causing the loss of 1,000 jobs. The Opel brand will be subsequently wind down by December, mass production of Chevrolet cars would also be stopped at the GAZ Russian joint venture, instead refocusing on premium cars. The deal with Russian automaker Avtovaz OAO will not cover the Chevrolet Niva sport utility vehicle, with the current generation still being built at the factory.