The state department is reviewing the case after Venezuela took over GM’s plant.
Geneal Motor’s manufacturing plant in Venezuela was unexpectedly taken by government authorities in the first nationalized seizure of a public company’s assets in nearly two years in the country. General Motors have ceased their operations in Venezuela as a result. According to a legal statement sent out by GM, the plant was “unexpectedly taken by the public authorities, preventing normal operations.” The automaker said it “strongly rejects the arbitrary measures taken by the authorities and will vigorously take all legal actions, within and outside of Venezuela, to defend its rights.”
The plant was shut down amidst protests in the capital city of Caracas against president Nicolas Maduro, after harsh economic times made the auto industry plummet. Sales have dropped 92% during March, a result of a shortage of dollars leading to prices becoming unaffordable for the average consumer. Venezuela is in the midst of its worst recession in decades, with gross domestic product dropping 10%. With 95% of the nation’s foreign currency earnings coming from oil, and with oil prices dropping, Venezuela’s import industry is suffering as well. Citizens are now standing in long lines to wait for average household items because of their scarcity.
Mark Toner, a spokesperson for the US State Department, says that the US government is looking into GM’s case and that they want to resolve it quickly: “A fair, predictable and transparent judicial system is critical to implementing the essential economic reforms critical to restoring growth and addressing the needs of the Venezuelan people,” Toner said.
The situation is reminiscent of 2014, when Clorox Co. halted its Venezuelan operations after inflation and government-mandated pricing freezes made business in the country unprofitable. Here too, Maduro’s government seized control of the plant and reopened it.
In order to get out of this situation, GM plans to pay separation benefits to their workers. The automaker employs 2,678 workers and has 79 dealers in the country with more than 3,900 workers. Currency restrictions currently spell big issues for car makers in Venezuela and have complicated transactions. In 2015, the government struck a deal with Ford, allowing the manufacturer to sell some cars in dollars. Customers would pay dollars for production materials and bolivars for local assembly. Similar deals were then reached with GM, Fiat, Toyota and Chrysler.