General Motors (GM) has suspended operations for at least three months at its Valencia vehicle assembly plant in Venezuela's central Carabobo state because it cannot buy enough dollars from the government to pay overseas suppliers. It currently owes them $1.2 billion.
GM is the country's largest automaker and the government has promised to provide it with $430m through to December this year, but this is not enough to prevent it from shutting down operations.
“We are temporarily closing our Valencia Plant which produces cars and light trucks due to a shortage of CKD Kits,” GM’s Vice President Global Purchasing and Supply, Latin America, Africa and Middle East, Johnny Saldanha, told Automotive Logistics. “We will continue to run our Mariara truck plant.
“Our suppliers and logistics providers understand the circumstances and reasons for this temporary closure. They understand this is not something which is in our control.”
The drop in oil prices has left 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. Venezuela relies on oil for 93% of exports.
The currency controls were introduced by President Hugo Chavez in 2003 and mean Venezuelan businesses (and individuals) must apply to a government agency for dollars to import goods or take vacations abroad.
Saldanha was eager to reassure local suppliers and logistics providers: “The constraints we face is to pay overseas suppliers due to the lack of foreign exchange release,” said Saldanha, “but in the case of overseas ocean carriers, these are contracted and paid by our CKD sources so there is no outstanding debt to them.”
He added: “We have no issues paying local suppliers and logistics providers as we pay them in local Bolivers.”
GM’s Valencia operation produces Chevrolet vehicles and pickups for the local market and the company uses local Venezuelan trucking and warehousing companies for both inbound and outbound automotive activity. The only foreign logistics company is Tegma of Brazil, a joint venture with local investors, which helps GM with outbound movements.