Story by Reuters
General Motors Co said it is likely it will cease vehicle production in Venezuela in July as the automaker joins other U.S. corporations in taking action to shield their profits from the South American country’s volatile currency.
GM has one plant in Venezuela, in Valencia, where it builds the Chevrolet Aveo and Cruze cars, the Orlando crossover vehicle and the Silverado pickup truck. The company said it employs about 3,000 people in the country.
Venezuela’s currency controls have been steadily reducing disbursement of greenbacks as low oil prices leave the OPEC nation receiving less export revenue.
That has resulted in broad consumer product shortages and caused auto assembly plants to struggle to import parts, forcing some of them to halt production lines and slash payroll.
GM has fired 446 workers and Ford Motor Co, which halted Venezuela operations two weeks ago for lack of parts, is considering laying off 267 workers, according to a union leader.
Other U.S. corporations, including Kimberly-Clark Corp , Procter & Gamble and PepsiCo Inc, have complained about how difficult it has been to convert Venezuelan bolivars into U.S. dollars.
In February, President Nicolas Maduro’s socialist government launched a 70 percent devaluation of the bolivar via a new “free floating” currency system known as Simadi.
GM said last week in a U.S. regulatory filing that the inability to obtain U.S. dollars in the near term would likely lead to a production shutdown in Venezuela.
“Absent an ability to obtain U.S. dollars in the near term, which we believe is unlikely, current vehicle production will likely cease in July 2015,” GM said in a filing last week with the U.S. Securities and Exchange Commission.
Despite the strong language in the SEC filing around ceasing production in Venezuela, GM spokesman Tom Henderson said no decisions have been made.
“We continue to work with the Venezuelan government to find solutions to convert currency,” Henderson said Wednesday in an email.
GM’s Venezuelan subsidiaries’ net assets were $500 million at the end of March, according to its latest quarterly filing with the SEC.
A number of large U.S. companies are expected to take a hit to their earnings during the first half of this year as they re-value their Venezuelan assets using less favorable exchange rates.
Halliburton Co said it recorded a $199 million foreign exchange currency loss in Venezuela in the first quarter. Previously, Halliburton measured its assets in Venezuela using the country’s official exchange rate of 6.3 bolivars per U.S. dollar.
But after the latest round of devaluation, Halliburton began using the Simadi rate of about 192 bolivars per U.S. dollar.