GM closes Venezuela plant

CARACAS, Venezuela — General Motors Corp.’s Venezuelan affiliate temporarily shuttered a local assembly plant Friday, suspending all car production in Venezuela and boosting fears that the closure could further slow sputtering economic growth.

GM suspended operations for at least three months at its auto assembly plant in Venezuela’s central Carabobo state, affecting 1,600 full-time employees who will see their salaries cut to minimum wage during the shutdown. A smaller plant that produces trucks will continue operating.

Car sales have soared in Venezuela in recent years as high oil prices fueled a consumer spending boom. In March, the sector employed 40,000 people and indirectly created another 100,000 jobs, according to Venezuela’s Automotive Chamber.

GM is the country’s largest automaker, producing more than half of the 54,000 cars assembled in the first five months of 2009, according to the chamber.

But auto output had already declined by 9.7 percent this year through May as government currency controls restricted imports, pushing GM to close its doors.

The controls, imposed by President Hugo Chavez in 2003, have prevented GM from getting the dollars it needs to import car parts, stalling sales and leaving the company with $1.2 billion in debts to foreign suppliers.

But lower oil prices, now 51 percent below July’s peak, have left crude-reliant Venezuela without its main source of foreign currency, making it more reluctant to part with dollar reserves and forcing it to cut back on dollar sales to importers.

GM’s operations could be halted for more than three months if the company doesn’t get permission to buy dollars soon, GM’s Venezuela chief Ronaldo Znidarsis said.

The government plans to sell auto manufacturers $2.5 billion in dollars this year so they can buy car parts, Trade Minister Eduardo Saman said.

Local businessmen worry that GM’s shutdown will slow other sectors of Venezuela’s economy, said Tulio Hidalgo, president of the Carabobo state chapter of the Fedecamaras business chamber.



by the associated press