G.M. Operations in Venezuela Are Seized as Protests Swell

The particulars of the dispute were murky. Venezuelan news reports said the seizure stemmed from a lawsuit that dated from the early 2000s with a company in the western city of Maracaibo. But Enrique Tahan, head of corporate and government relations for G.M. in Venezuela, said on Thursday that for the last 42 days, the plant had been shut down by an aggressive takeover by members of one of its unions.

G.M. had asked the government to help the company retake control of the plant, he said, but instead, the government took over the facility itself.

“In other words, we are twice out of control of our plant,” Mr. Tahan said.

Mr. Tahan said that members of the union were able to enter the plant, but that no managers from the company were allowed by the government.

A G.M. spokeswoman, Dayna Hart, said the plant had not been producing cars for an extended period of time.

“G.M. strongly rejects the arbitrary measures taken by the authorities and will vigorously take all legal actions to defend its rights,” the company said in a statement.

Venezuela’s auto industry has nearly ground to a halt amid political instability, currency issues and an economic collapse that has led to violent protests across the nation.

Last year, automakers sold only about 3,200 new vehicles compared with more than 17,000 in 2015, and plants have been closed for months because of lack of demand. And the move against G.M. only adds to the continuing collapse of the industry in Venezuela.

Photo

A Chevrolet dealership in Caracas in 2015. Chevy’s parent, General Motors, says the Venezuelan government has seized the automaker’s operations in the country.

Credit
Carlos Garcia Rawlins/Reuters

Five years ago, automakers made more than 100,000 cars and trucks in Venezuela, according to the research firm Wards Auto. But production has steadily declined since then, primarily because of currency issues that have choked off the supply of parts into the country.

Last year, automakers made only 4,900 vehicles, including heavy-duty pickups, down from 31,000 the previous year.

Other automakers, including Ford Motor and Toyota, have closed their plants for several months at a time because of the low demand and an inability to obtain necessary parts.

Two years ago, Ford took an $800 million pretax charge to cover accounting changes for its Venezuelan operations.

The Venezuelan government has expropriated more than 1,400 private businesses since 1998, including construction, energy and finance companies, according to the American State Department.

Former President Hugo Chávez engaged in high-stakes seizures against companies that did not cooperate with his policies, such as when he expropriated assets of Exxon Mobil after it refused to negotiate contracts in 2007. Mr. Maduro expropriated Clorox’s facilities after it said it was closing in 2014.

Lately, however, Mr. Maduro has focused on intimidating local companies, as in the December 2016 seizure of warehouses of toys owned by a Caracas outfit. Critics called the move a publicity stunt: It was called Operation Baby Jesus by the government, which distributed the toys before Christmas on state television.

Still, Venezuela’s teetering economy, rampant inflation and mounting crime have proven large challenges for multinationals operating there. Among the biggest obstacles is the country’s system of currency controls, among the strictest in the world.

The situation has left many foreign companies debating whether to stay. Remaining in Venezuela means continued losses, while leaving the country would mean investing from scratch should government policies become more favorable.

A third option is known as “deconsolidation.” Under United States accounting laws, a company may assign market value to a subsidiary’s assets and afterward consider it an investment rather than a separate operation. The move allows a multinational to take a one-time charge but remain in Venezuela.

In the last two years, many companies have deconsolidated their Venezuelan operations, including the tire-maker Goodyear, which took a $646 million charge for its Venezuelan operation last year. Bridgestone and Pirelli both announced similar measures that year, with write-offs of $360 million and $614 million.

Pepsi took a $1.4 billion write-off for its Venezuela business in 2015, citing the breakdown of the country’s foreign exchange market. Procter & Gamble took a $2.1 billion write-off in 2015 for Venezuela.

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20 April 2017 | 4:53 pm – Source: nytimes.com