General Motors Reassesses Expansion Timing of Russian Plant
General Motors Co. (GM) revealed that it is reassessing the expansion timing of its Russian plant near St Petersburg. Notably, the automaker had invested $300 million in the plant in 2008 and plans to initiate the second phase in 2015. However, the prevailing weakness in the Russian auto market has compelled the company to reconsider its expansion plans.
General Motors’ Russian unit manufactures Chevrolet Cruze, Opel Astra, and Chevrolet Trailblazer. However, the automaker did not name the models it plans to manufacture during the second stage.
Recently, General Motors stated its intentions to reduce production at the plant due to the present slump in the Russian auto market. Vehicle sales have declined in Russia due to lower economic growth, which adversely affected consumer demand. Further, customer sentiment was affected by the conflict in Ukraine. Considering the latest evaluations, General Motors has disclosed that this plant will be operating for four days in the month of August and another four days in September along with eight days in October.
As per data from the Association of European Businesses, the Russian auto market has been recording declining sales since Jun 2014. In August this year, sales dropped 17%, while July sales deteriorated 23%. Furthermore, General Motors’ Chevrolet vehicle sales fell a substantial 45% year over year in July, while Opel sales plummeted 25%.
Apart from General Motors, other automakers are also facing the brunt of a sluggish Russian economy. In response to the current downturn, Ford Motor Co. (F) called off a $329 million investment plan for its Russian joint venture with OAO Sollers in the second quarter after it announced plans to retrench 950 positions at two of the partnership’s operating units.
General Motors currently carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks worth considering include Tesla Motors, Inc. (TSLA) and Fox Factory Holding Corp (FOXF). Tesla sports a Zacks Rank #1 (Strong Buy) while Fox Factory carries a Zacks Rank #2 (Buy).
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