GM Bets on Russian Growth as Opel Faces Cuts in Germany
General Motors is ramping up production in St. Petersburg and launching 12 new models in Russia, even as it prepares to close its Bochum plant in Germany.
General Motors is doubling capacity at its St. Petersburg plant to 230,000 vehicles a year and launching 12 new models in Russia, as it looks to offset persistent losses in Western Europe and prepares to close its Bochum factory in Germany.
The expansion in Russia comes as GM faces its twelfth consecutive year of losses in Europe, including a $747 million shortfall last year. The company has confirmed that the Bochum plant will not be allocated any new models after the Opel Zafira Tourer reaches the end of its production cycle, which is expected to be around 2016. No replacement production is planned for Bochum, raising the prospect of closure and job losses at the German site.
In contrast, GM broke ground on the St. Petersburg expansion in June, with the aim of more than doubling annual capacity from 98,000 to 230,000 vehicles by 2015. The workforce is set to grow from 2,500 to 4,000. The new Opel Astra saloon will be built at the Russian plant, targeting a market that saw car sales rise 15 percent to 1.14 million in the first five months of the year, according to the Association of European Businesses’ Automobile Manufacturers Committee.
Russian sales growth contrasts with European losses
GM's combined Chevrolet, Opel and Cadillac sales in Russia climbed 53 percent last year to 244,000 vehicles. In the first five months of this year, Chevrolet sales in Russia rose 18 percent to 74,788, while Opel sales jumped 34 percent to 32,190. The company is introducing 12 new models in the Russian market this year, banking on continued growth to help offset weak demand and overcapacity in Western Europe.
Impact on jobs in Germany and Russia
In Russia, the St. Petersburg expansion will create up to 1,500 new jobs, bringing total employment at the plant to 4,000. The investment reflects GM's confidence in the Russian market, which is now one of the largest in Europe by volume and continues to attract investment from global manufacturers.
GM's strategy: shift production to growth markets
The decision to wind down Bochum while ramping up in Russia signals GM's intention to focus resources on markets with stronger growth prospects. The company is betting that increased local production and a broader model range will allow Opel and Chevrolet to secure a larger share of Russian sales, compensating for the ongoing difficulties in Western Europe.
With no new models for Bochum and a major expansion in St. Petersburg, GM is making clear where it sees its future in the region.
