General Motors (NYSE:GM) is in shock. The Detroit, Michigan-based automaker confirmed on Wednesday that authorities in Venezuela have suddenly seized their plant in the country, and they are thus forced to halt production. GM has revealed they will now make separation payments to the workers in the plant.
The world’s third-largest automaker says this was an “illegal judicial seizure of its assets”. GM says the seizure shows “total disregard” of legal rights. In fact, not only did the authorities take control of the plant, they even removed assets including cars from the facilities. The company issued a strong statement saying, “GM strongly rejects the arbitrary measures taken by the authorities and will vigorously take all legal actions, within and outside of Venezuela, to defend its rights”.
Authorities in the country have not responded yet.
Venezuela Has Been Seizing Private Businesses for Years
It was not known why they seized the General Motors plans. However, since President Hugo Chavez came to power, large sections of the economy have been nationalized. The state has taken control of cement, energy telecommunications, and oil businesses. Nicolas Maduro, who is currently the President, is continuing this tradition, though the country is passing through its worst economic condition in decades.
Maduro, though, has blamed the United States and its businesses for their political and economic problems. He is leading the country like a dictator and preventing the opposition from holding protests.
The General Motors plant in Venezuela is located in the northern city of Valencia. It employs close to 3,000 workers. The plant, however, stopped making cars a couple of years back, and has been making spare parts since then. Actually, GM was partially forced to stop making cars in the country, because like the other automakers, they too could not access US dollars for importing parts.
ExxonMobil (NYSE:XOM) had a narrow escape. They stopped production just in time before Chavez went on his nationalization spree. Exxon took the government to court. Coca-Cola and Kimberly-Clark too had to halt production.
The Venezuelan Economy Is In Deep Crisis
Venezuela is in deep crisis at this time. Last year, the economy shrank 18%. It was the third consecutive year of depression, and 2017 looks no better. Unemployment has surpassed 25%. There is a widespread shortage of medicine and food. The value of its currency has been wiped out because of hyperinflation. The price of everything has skyrocketed.