General Motors Co. (NYSE: GM) has shut down operations in Venezuela following the government’s seizure of the GM plant in Carabobo on Wednesday. In a statement, the company said it was forced to lay off the plant’s 2,700 workers.
New car sales in Venezuela dropped 92% year over year in March, according to a Bloomberg report, as the country has been rocked by a recession that has sent gross domestic product plunging. GM took charges totaling $1.14 billion in 2014 and 2015 related to currency devaluation and asset impairments in Venezuela.
In GM’s annual report for 2016 the company noted:
We monitor the environment in Venezuela closely to assess whether changes evolve such that we no longer maintain a controlling financial interest. Absent ongoing vehicle production, our Venezuelan subsidiaries may require additional financial support. At this time no decision has been made whether we will provide further financial support if required. If a determination is made in the future that we no longer maintain control, we may incur a charge based on exchange rates at December 31, 2016 of up to $0.1 billion.
In addition to its Carabobo factory employees, GM also has a Venezuelan network of 79 dealers employing more than 3,900 workers. GM plans to pay these workers and the laid off factory workers separation benefits required by law.
GM also noted in its statement regarding the expropriation of the plant that it will “vigorously take all legal actions, within and outside of Venezuela, to defend its rights.”
GM produced no vehicles at the plant during 2016 and has produced none to date in 2017, according to a report in The Wall Street Journal. The company built 5,052 cars in Venezuela in 2015. The currency devaluation and economic collapse have put new car purchases out of reach of all but the wealthiest residents of the country.
Shares of GM traded up about 0.8% Thursday morning, at $34.06 in a 52-week range of $27.34 to $38.55. The 12-month price target on the stock is $40.05.