Business First Look

GM closes up shop in Venezuela after government seizes its factory

General Motors said on Thursday that it has withdrawn its operations in the South American country after local authorities illegally seized its factory, a move that experts say could have deeper implications on the relationship between the two countries. 

The General Motors logo at the company's world headquarters in Detroit is shown in this May 2014 photo. General Motors says it has halted operations in Venezuela after authorities seized its factory on Wednesday in what GM called an illegal judicial seizure of its assets.
Paul Sancya/AP/File
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Caption
  • Juan Carlos Hernandez and Joshua Goodman
    Associated Press

General Motors announced Thursday that it was shuttering its operations in Venezuela after authorities seized its factory in the country, a move that could draw the Trump administration into the escalating chaos engulfing the South American nation amid days of deadly protests.

The plant in the industrial city of Valencia was confiscated Wednesday as anti-government protesters clashed with security forces and pro-government groups in a country battered by economic troubles, including food shortages and triple-digit inflation. Three people were killed and hundreds arrested in the deadliest day of protests since the unrest began three weeks ago.

The seizure arose from an almost 20-year-old lawsuit brought by a former GM dealership in western Venezuela. The dealership had been seeking damages from GM of 476 million bolivars – about $665 million at the official exchange rate, or $115 million on the black market where many Venezuelans are forced to turn to sell their increasingly worthless currency. GM said it was notified this week that a low-level court ordered the seizure of its plant, bank accounts and other assets in the country.

Hundreds of workers desperate for information about their jobs gathered at the plant Thursday to meet with government and military officials, as well as representatives of the dealership that brought the lawsuit. The neglected factory hasn't produced a car since 2015 but GM still has 79 dealers that employ 3,900 people in Venezuela, where for decades it was the market leader.

General Motors' announcement came as Venezuela's opposition moved to keep up pressure on President Nicolas Maduro, taking to the streets again Thursday a day after the biggest anti-government demonstrations in years.

It's not the first time the Venezuelan government has seized a foreign corporation's facilities. Last July, the government said it would take over a factory belonging to Kimberly-Clark Corp. after the American personal care giant said it was halting manufacturing because materials weren't available in Venezuela.

But the move against GM, the United States' biggest automaker, was a much more powerful statement, and could lead to a further erosion of relations between the two countries.

"This is a test case for Trump," said Raul Gallegos, a Bogota-based analyst at Control Risks consultancy. "His response to a rogue nation taking over the assets of a brand name US company will be indicative of the road it wants to take with Venezuela."

The State Department said Thursday it was reviewing details of the GM case but called on authorities to act swiftly and transparently to resolve the dispute.

"A fair, predictable and transparent judicial system is critical to implementing the essential economic reforms critical to restoring growth and addressing the needs of the Venezuelan people," State Department spokesman Mark Toner said.

Later Thursday, President Maduro said he had called for an investigation into cellphone operator Movistar for allegedly being part of the "coup-minded march" organized by adversaries of his government. He said the subsidiary of Spain's Telefonica "sent millions of messages to users every two hours" in support of Wednesday's protests.

Tens of thousands of protesters took to the streets again Thursday to demand elections and denounce what they consider an increasingly dictatorial government. They were met by a curtain of tear gas and rubber bullets as they attempted to march to downtown Caracas.

The move has energized Venezuela's fractious opposition, which had been struggling to channel growing disgust with Maduro over widespread food shortages, triple-digit inflation and rampant crime.

Opponents are pushing for Maduro's removal through early elections and the release of scores of political prisoners. The government last year abruptly postponed regional elections the opposition was heavily favored to win and cut off a petition drive to force a referendum seeking Maduro's removal before elections late next year. The opposition sees the government measures as turning Venezuela into a nearly full-blown dictatorship.

But the government hasn't backed down.

Maduro, addressing supporters Wednesday, said he was "anxious" to see elections take place sometime "soon" and repeated his call for dialogue, something many in the opposition see as a stalling tactic.

"Today they attempted to take power by force and we defeated them again," said Maduro, adding that authorities rounded up several armed opponents seeking to carry out a coup. He didn't provide any evidence to back up the claim, and the opposition rejected it as an attempt to intimidate Venezuelans from exercising their constitutional right to protest.

As tensions have mounted, the government has used its almost-complete control of Venezuela's institutions to pursue its opponents. On Wednesday alone, 565 protesters were arrested nationwide, according to Penal Forum, a local NGO that provides legal assistance to detainees. The group said 334 remained in jail on Thursday.

A young Venezuelan man returning home late from work Thursday was fatally shot when he got caught in the middle of late-night street clashes that engulfed many working-class neighborhoods in Caracas.

The death Thursday night of Melvin Guitan in a poor neighborhood in eastern Caracas brings to nine the number of people killed nationwide this month as part of almost-daily, increasingly violent protests against Maduro.

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