General Motors has almost no cars left to sell in the Venezuelan market, which it dominates, putting the carmaker at risk of losing tens of thousands of sales there.
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A lack of currency from the Venezuelan Government to pay its suppliers means that car production has had to be halted for at least three months.
“We shut down our operations on Monday. We owe almost US$1.0 billion to our suppliers, over 90% of which is debts are over 290 days old,” GM Venezolana President and Managing Director Ronaldo Znidarsis has exclusively told just-auto.
In an attempt to slow the flow of capital out of the country, Venezuela’s quasi-communist President Hugo Chávez introduced currency controls six years ago, whereby businesses and individuals must apply to a Government agency for the foreign currency they need to pay for imported goods or travel abroad.
The scheme has been wrought with difficulties since its inception, however, not least as companies complain of extraordinary delays in receiving the money. Now, the problem has allegedly been exacerbated by the drop in global oil prices which has severely dented the country’s export revenues, leaving it with insufficient funds to pay out.
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By GlobalDataZnidarsis acknowledges that the Government has made an offer to give the Venezuelan automotive industry US$2.5 billion to pay off its debts. But, he says, GM has been told that it will only receive US$430 million of that, which is supposed to last it for the rest of the year.
“If we were able to pay our suppliers today, we could restart the factory at the end of September or the beginning of October. It will take us that long to replenish our component supplies” Znidarsis said. “But we have to be able to guarantee our payments with suppliers. We can only restart production if we pay off our debts of around US$1 billion and if we are able to guarantee payments to them for the rest of the year. That is why we have gone to the National Assembly to ask for more support in paying our suppliers.”
In 2007 and 2008, the Government gave some carmakers – including GM – a licence to import cars as well as produce them locally.
In those years, GM sold 151,115 and 90,118 units in Venezuela, respectively, enabling it to take a near 60% share of the passenger car market. For 2009, however, the Government did not give out any import licences to any vehicle manufacturers, which means that they must all rely solely on local production.
GM had intended to build 140,000 vehicles in the country this year, a target that it now has no chance of hitting. In the first five months of the year, GM was only able to sell 31,622 units, reducing its market share to 44.8%.
“Venezuela is very important to us – we have been here 60 years,” Znidarsis said. “We continue to run our truck plant here and the rest of our operations are still running as well. We’re working hard to keep things going and to try and work with the Government. Right now, we are still trying to support aftersales and our dealers. But the dealers can only sell what they already have in stock, and there are no more cars on the lot – our stocks have almost run out already.”
Rebecca Wright
