After plant seized, GM charts Venezuela exit
Reasons factory grabbed unclear
Posted: April 21, 2017 at 3:08 a.m.
General Motors Co. announced Thursday that it is pulling out of Venezuela after authorities there seized one of its auto plants, a fresh sign of the turmoil gripping the country as anti-government protests spread.
The plant in the industrial city of Valencia was confiscated by the government Wednesday as anti-government protesters clashed with security forces and pro-government groups in a country battered by economic troubles, including food shortages and triple-digit inflation.
Three people were killed, and hundreds were arrested in the deadliest day of protests since the latest unrest began three weeks ago.
GM called the confiscation of its factory "an illegal judicial seizure of its assets" and announced that it would cease operations in the country, where it employs nearly 2,700 people. The move against GM could further strain relations between Venezuela's leftist government, led by President Nicolas Maduro, and Washington.
The company is not the first foreign firm whose assets have been confiscated by Venezuelan authorities, but those actions typically have been preceded by repeated public threats from the socialist government. Venezuela is currently fighting claims of illegal asset seizures at a World Bank-sponsored arbitration panel from more than 25 companies.
GM vowed to legally defend itself, but getting compensated could be difficult. Under the late Hugo Chavez, Venezuela seized some Exxon Mobil assets. The oil giant sought compensation of $16.6 billion. The company won a $1.4 billion judgment, but earlier this year the arbitration panel determined that Venezuela had to pay only $180 million.
GM can seek compensation and legal damages for its lost plant in several international venues, said Nigel Blackaby, a lawyer at the Freshfields Bruckhaus Deringer law firm, which has battled Venezuela in several high-profile cases in international courts.
The venue depends on what treaties, if any, govern the investment, he said. While Exxon's case was heard by the World Bank panel, Freshfields has been successful in pursuing claims against Venezuela's government before a United Nations panel.
Venezuelan officials offered no explanation for its seizure of the GM plant. Some analysts saw it as part of a pattern of confrontation between Maduro's government and manufacturers as the economic situation deteriorates.
But the timing of the move also led to suspicions that Maduro may be looking to escalate tensions with the United States and blame his government's struggles on a brewing confrontation with President Donald Trump's administration. Maduro claims that his opponents are colluding with U.S. authorities to overthrow him.
"It fits a broader pattern, in the sense that the government's response to surges in opposition activity tends to be the deepening of the revolution," said Phil Gunson, a Venezuela-based analyst for the International Crisis Group, using the government's term for its socialist makeover of Venezuelan society. "There are those at the top, including Maduro himself, who appear genuinely to believe that this is a revolution and the ultimate goal is the replacement of the capitalist economy with one that is entirely state-run."
Later Thursday, Maduro said he had called for an investigation into cellphone operator Movistar on accusations that it was part of the "coup-minded march" organized by adversaries of his government. He said the subsidiary of Spain's Telefonica "sent millions of messages to users every two hours" in support of Wednesday's protests.
On Wednesday, a Venezuelan court in the western state of Zulia ordered the American company's assets frozen and its property seized, deciding against GM in a suit filed by a former GM dealer in 2000, according to Venezuelan news accounts. Why the court issued the ruling 16 years later, at the peak of anti-Maduro protests, was unclear.
The automaker said the judicial order was "arbitrary" and "in total disregard of [GM's] right to due process, causing irreparable damage to the company."
Hundreds of workers desperate for information about their jobs gathered at the plant Thursday to meet with government and military officials as well as representatives of the dealership that filed the lawsuit.
The State Department said Thursday that it was reviewing details of the GM case and called on authorities to act swiftly and transparently to resolve the dispute.
"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," State Department spokesman Mark Toner said.
U.S. Sen. Marco Rubio, R-Fla., took a stronger stance Thursday against the Venezuelan government.
Rubio said Maduro's administration has again shown "its lack of regard for the rule of law and the most basic democratic norms."
He said U.S. and other foreign companies operating in Venezuela "should have no illusions about the risks of doing business under the current regime."
Auto manufacturing virtually has come to a halt in Venezuela in a broader economic collapse under Maduro. The economy contracted by an estimated 18 percent last year, as the country faced one of the world's highest inflation rates and suffered widespread shortages of food and medicine.
Once one of Latin America's wealthiest nations, the oil-rich country has witnessed a broad, painful withering of industrial activity.
Tens of thousands of protesters took to the streets again Thursday to demand elections and denounce what they consider an increasingly dictatorial government. They were met by a curtain of tear gas and rubber bullets as they attempted to march to downtown Caracas.
Late Thursday, the governments of Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Paraguay, Peru and Uruguay said they were "energetically condemning" the violence in Venezuela and lamenting that international calls for the ongoing demonstrations to be peaceful had been ignored.
Argentina's Foreign Ministry released a statement saying the nine countries support the declaration by the United Nations secretary-general calling for "concrete measures to be adopted by all sides to reduce the polarization and create the conditions necessary to face the country's challenges for the benefit of the Venezuelan people."
Other foreign companies have been targeted by the Venezuelan government.
Last year, authorities seized a plant owned by U.S.-based multinational Kimberly-Clark, renaming it after a 16th-century indigenous leader who rebelled against Spanish colonial rule. But diapers, sanitary napkins and other health products manufactured at the plant remain scarce in Venezuela because of acute shortages of raw materials.
In recent years, Bridgestone, General Mills, Procter & Gamble, Ford Motor Co. and other multinational corporations have scaled back operations in Venezuela. Ford suspended operations at its Valencia plant in December because of slumping sales. Toyota said its lone factory in Cumana, Venezuela, continues to operate normally.
GM's Venezuelan operations have been a drag on earnings for several years. In the second quarter of 2015, the company took a $720 million charge for currency devaluation and asset valuation write-downs as the economy faltered.
South American operations, which include Venezuela, account for about 6 percent of GM's total sales. Last year, GM lost $400 million before taxes in South America, but overall it made a pretax profit of $12.5 billion.
GM shares rose 31 cents to close at $34.10.
Information for this article was contributed by Nick Miroff and Mariana Zuniga of The Washington Post; and by Tom Krisher, Joshua Goodman, Dee-Ann Durbin, Christopher Rugaber and Juan Carlos Hernandez of The Associated Press.
A Section on 04/21/2017