General Motors (NYSE:GM) has announced that it is ending its operations in Venezuela after its only factory in the country was confiscated yesterday. According to reports, GM was notified this week that an embargo of its plant, bank accounts and other assets in the country had been ordered by a low-level court. Venezuelan news reports said the seizure stemmed from a lawsuit that dated from the early 2000s.
GM said that the taking of assets from the plant caused the company irreparable damage. The company said in a statement, “GM strongly rejects the arbitrary measures taken by the authorities and will vigorously take all legal actions to defend its rights.” The Detroit automaker will face an uphill battle to recover any damages.
Hundreds of workers gathered at the plant Thursday to meet with government and military officials. GM has about 2,700 workers in Venezuela, along with 79 dealers that employ 3,900 people. If the government permits it, GM workers at the Valencia plant will get separation benefits due to the loss of their jobs. The GM statement said dealers will continue to service vehicles and provide parts.
GM has been the market leader in Venezuela for over 35 years. Its parts suppliers make up more than half of Venezuela’s auto parts market. However, a GM spokeswoman said the plant had not been producing cars since 2015 and the company’s Venezuelan operations have been a drag on earnings for several years. The company took a $720 million charge for currency devaluation and asset valuation write-downs in the second quarter of 2015 as the economy faltered.
Auto production in Venezuela has nearly stopped completely amid the country’s economic collapse. Auto manufacturers assembled just 2,849 cars last year in the country, from a peak of 172,218 vehicles in 2007. The government has limited car companies’ access to dollars needed to import parts and repatriate profits. The country’s system of currency controls is among the strictest in the world. The situation has left many foreign companies debating whether to stay.
GM is just the latest corporation to have a factory or other asset seized by the government of Venezuela. The Venezuelan government has expropriated more than 1,400 private businesses since 1998, including construction, energy and finance companies. Last July, the government took control of a factory belonging to Kimberly-Clark Corp. Clorox’s facilities were expropriated after it said it was closing in 2014.