"This change in our business model in Russia is part of our global strategy to ensure long-term sustainability in markets where we operate," GM president Dan Ammann said in a statement. "This decision avoids significant investment into a market that has very challenging long-term prospects."
Russian customers interested in an Opel or mainstream Chevys like the Spark, Aveo (the US market Sonic), Cobalt (shown above), Cruze, Orlando and the like have until December to snap up a car before the brands are pulled.
"We do not have the appropriate localization level for important vehicles built in Russia and the market environment does not justify a major investment to further localize." Opel Group CEO Karl-Thomas Neumann said.
GM will continue to offer service to customers in Russia. "We can assure our customers that we will continue to provide warranty, parts and services for their Chevrolet and Opel vehicles," Neumann said.
Beyond realigning its brands in Russia, GM also announced that it would also be idling the company's factory in the country's second-largest city, St. Petersburg. This is the second time the St. Petersburg factory has been in the news – GM announced that it'd be idled for roughly two months back in February.
Scroll down for the official press release from GM.
Focus on Cadillac and iconic Chevrolet vehicles
Wind down Opel brand and sale of mainstream Chevrolet cars
Idle GM Auto manufacturing facility in St. Petersburg
Part of GM's strategy to ensure long-term sustainability in global markets
DETROIT – General Motors today announced plans to change its business model in Russia. GM will focus on the premium segment of the Russian market with Cadillac and U.S.-built iconic Chevrolet products such as the Corvette, Camaro and Tahoe. The Chevrolet brand will minimize its presence in Russia and the Opel brand will leave the market by December 2015.
"This change in our business model in Russia is part of our global strategy to ensure long-term sustainability in markets where we operate," said GM President Dan Ammann. "This decision avoids significant investment into a market that has very challenging long-term prospects."
Opel Group CEO Karl-Thomas Neumann said, "We do not have the appropriate localization level for important vehicles built in Russia and the market environment does not justify a major investment to further localize."
The GM Auto plant in St. Petersburg will halt production by the middle of 2015. GM is planning to idle the plant. Furthermore, the contract assembly of Chevrolet vehicles at GAZ will be discontinued in 2015.
The GM-AVTOVAZ joint venture will continue to build and market the current generation Chevrolet NIVA. GM's global luxury brand Cadillac will be set up for growth in Russia over the next several years as it prepares for numerous product introductions.
Chevrolet and Opel will work closely with their dealer networks in Russia to define future steps while ensuring the company will honor its obligations to existing customers in the coming years. "We can assure our customers that we will continue to provide warranty, parts and services for their Chevrolet and Opel vehicles. We want to thank our customers and dealers for their loyalty to the Chevrolet and Opel brands," said Neumann.
"We had to take decisive action in Russia to protect our business. We confirm our outlook to return the European business to profitability in 2016 and stick to our long-term goals as defined in our DRIVE!2022 strategy," said Neumann. By 2022, the company plans to raise its market share in total Europe to 8 percent and to reach a profit margin of 5 percent.
As a result of the decision to change the business model in Russia, GM expects to record net special charges of up to approximately $600 million primarily in the first quarter of 2015. The special charges include sales incentives, dealer restructuring, contract cancellations and severance-related costs. Approximately $200 million of the net special charges will be non-cash expenses.
General Motors Co. (NYSE:GM, TSX: GMM) and its partners produce vehicles in 30 countries, and the company has leadership positions in the world's largest and fastest-growing automotive markets. GM, its subsidiaries and joint venture entities sell vehicles under the Chevrolet, Cadillac, Baojun, Buick, GMC, Holden, Jiefang, Opel, Vauxhall and Wuling brands. More information on the company and its subsidiaries, including OnStar, a global leader in vehicle safety, security and information services, can be found at http://www.gm.com.