Russian market might help GM offset Europe losses

Article by Christian Andrei, on June 26, 2012

Amid the persistent losses in western Europe, General Motors Co. has decided to capitalize on the booming auto market in Russia. It has recently broken ground on the expansion of its plant in St. Petersburg, Russia, that will more than double the yearly production capacity from 98,000 vehicles currently to 230,000 vehicles by 2015.

This facility will produce the new Opel Astra compact together with the Chevrolet models as GM aims to push its European unit to recovery. When interviewed right before the start of the plant expansion, GM CEO Dan Akerson said that it will offer its “best products” to the market.

This year, GM will unveil 12 new models in Russia. Last year, it had raised the combined Chevrolet, Opel and Cadillac sales in the country by 53% in 2011 to 244,000 units. GM is making strides to prevent rivals from dominating in this quick-growing market even as western Europe’s vehicle sales drop for the fifth consecutive year.

Akerson is tasked to revive GM Europe, which has posted $16.4 billion in losses since 1999 for its U.S. parent. It will add five Opel models in Russia, while expanding Chevrolet and Cadillac brands worldwide.

GM posted an adjusted operating loss in Europe in the first quarter of $256 million and it also had $590 million in writedowns. GM, which declined to give details about its investment at the St. Petersburg plant, will increase its workforce in this facility by 60% to 4,000.

PricewaterhouseCoopers LLP said that the Russian auto market reached 2.9 million vehicles in 2008 before dropping to 1.5 million in 2009. Akerson said that auto sales in the country, which gained 39% to 2.65 million in 2011, will likely go up to over 3 million in 2012 or in 2013.

Topics: russia, gm

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