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Venezuela seizes GM plant as crisis escalates

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Venezuela seizes GM plant as crisis escalates,

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General Motors halted operations in Venezuela on Thursday after the car maker’s plant in the country was seized by public authorities, the company said. Elissa Robinson/ DFP

Venezuela’s seizure of a General Motors factory marks a step in the country’s economic crisis that boosts risks to the remaining operations of other U.S. and multinational companies.

Amid turmoil punctuated by skyrocketing prices, unemployment, low oil prices and failed economic policies, the government seizure put an abrupt end to GM’s operations — a fate that other companies have faced.

“GM is not the first and they’re not going to be the last because the government of Venezuela is desperate for any assets they can take,” said Peter Quinter, Miami-based chair of law firm GrayRobinson’s Customs and International Trade Law Group. “It really is a vicious cycle they’re in.”

The Venezuelan government has previously seized assets belonging to U.S. companies, including those of cleaning products maker Clorox in 2014, glassmaker Owens-Illinois in 2010 and nationalized a rice mill operated by Cargill.

GM denounced the South American country’s actions as an “illegal judicial seizure of its assets” and vowed a legal battle, but the company’s protections are minimal in a country with a dubious commitment to the law.

Although other automakers, including Fiat Chrysler and Toyota, said their plants had not been touched, the Venezuelan government’s assault on the world’s third-largest automaker suggests the country is getting bolder as its economic circumstances deteriorate.

The move comes amid intense public protests in Venezuela against the government of President Nicolas Maduro. Three people were killed late Wednesday as tens of thousands of Venezuelans took to the streets to demand fresh presidential elections and the release of jailed opposition politicians.

General Motors Venezolana, GM’s local subsidiary, was established in 1948 and employs about 2,700 workers and has 79 dealers in the country. The firm said it would make “separation payments” to affected workers.

GM representatives did not respond to questions about whether the company had contacted the Trump administration for help.

To be sure, the direct financial impact on GM is not likely to be large. Consequently, investors were not shaken by the plant’s demise. GM shares rose 31 cents Thursday to close at $34.10.

“Any lost production is unlikely to prove material,” Evercore ISI analyst Arndt Ellinghorst said in a note to investors, adding that the “day may have arrived” where the plant is unsalvageable.

As for other automakers, Ford had already shut down its Venezuela plant due to lack of demand but the company remains in possession of the facility, spokeswoman Kelli Felker said Thursday.

Toyota’s “operations in Venezuela are currently operating normally,” spokesman Scott Vazin said. “Our team members, dealers and customers remain our top priorities, and we are monitoring the situation closely.”

Fiat Chrysler “is maintaining its production plans in Venezuela in support of efforts to rebuild the country’s automotive sector,” the company, which makes the Jeep Grand Cherokee and Dodge Forza in the country, said in a statement.

GM said in a statement that vehicles and other assets had been taken from its facilities. The Detroit-based company did not provide details about how the seizure unfolded.

The automaker said it would “vigorously take all legal actions, within and outside of Venezuela, to defend its rights.”

But its legal recourse against the Venezuelan government is likely limited, Quinter said.

“They can go to the courts here in the United States and try to seek action. But that really is not going to be effective unless the Venezuelan government has some assets here” that could be seized as compensation, Quinter said. “I don’t see that happening.”

Venezuela has high crime and inflation rates and there are shortages of many basic goods and services. It is oil-rich but cash-poor. Maduro has used his Socialist government’s institutions to pursue political opponents.

Much of Venezuela’s woe stems from the low price of oil, the export that has long fueled the economy. But the country’s troubles also stem from government overspending, runaway inflation and corruption.

The country is engulfed by food shortages. People have turned their pets loose in the streets, unable to buy food for them. Companies have tried to cope. Coca-Cola said last year that it could no longer obtain the raw material to bottle the sugar-based version of its famous soft drink.

Relations with the U.S. have been tense in recent years, although Maduro’s anti-American rhetoric has softened since President Trump took office. Venezuela’s Information Ministry was not immediately available for comment Thursday.

“We are concerned that the government of Maduro is violating its own constitution and is not allowing the opposition to have their voices heard, nor allowing them to organize in a way that expresses the views of the Venezuelan people,” U.S. Secretary of State Rex Tillerson told reporters Wednesday, before the GM episode was publicized.

The troubled Venezuelan economy has dragged down the auto industry for several years, as tanking sales and abysmal currency exchange rates have undermined earnings.

GM said it was “confident that justice will eventually be served and looks forward to continue leading the Venezuelan market.”

“In the meantime, GMV, through its dealers, will continue to provide aftermarket service and parts for its customers,” the company said.

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Contributing: Brent Snavely of the Detroit Free Press.

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