Russian slump prompts GM to review timing of plant expansion

Opel Astras are produced at a General Motors plant in St. Petersburg, Russia.
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MOSCOW (Reuters) - General Motors Co. is reviewing the timing of the expansion of its Russian plant near St Petersburg because of a slump in the country's auto market.

GM opened the $300 million factory in 2008 and planned to launch the second stage in 2015. The plant currently builds Chevrolet Cruze, Opel Astra, and Chevrolet Trailblazer models.

"In view of the current business situation in Russia and the lower sales volumes since the start of the year, we are taking a close look at our plans. As part of this, we are also reviewing the timing of our expansion plans at the GM Auto Plant in St Petersburg," a GM spokesman said today.

The company has not disclosed which models the second stage of the plant would produce. In 2012, GM laid out plans to raise annual production capacity in St. Petersburg to 230,000 vehicles by next year.

On Thursday, GM said it was to reduce production at the plant to four days a month in August and September, extending to eight in October.

Car sales have faltered in Russia this year as economic growth has slowed, causing people to put off large purchases. Consumer sentiment has come under further pressure because of Western sanctions over the crisis in Ukraine.

Seven-month car and light-vehicle sales dropped 10 percent to 1.41 million from a year earlier, including a 23 percent plunge in July. Seven-month deliveries by GM’s Chevrolet brand plunged 23 percent to 73,749 vehicles, while sales by GM’s Opel division dropped 17 percent to 38,440 cars, according to figures compiled by the Association of European Businesses in Russia.

Besides GM, other Western automakers, which have invested in a country that’s soon expected to pass Germany as Europe’s biggest car market, are reducing production and lowering forecasts.

Ford Motor Co.  wrote down its entire $329 million investment in its Russian joint venture with Sollers the second quarter after outlining plans in April to eliminate 950 positions at two of the partnership’s plants.

Renault, which shares control of AvtoVAZ, Russia’s largest carmaker, said last month that the full-year contraction in the country’s auto market may exceed a predicted 10 percent drop.

Bloomberg contributed to this report

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