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Business

GM pulls plug on Opel plant in Russia

US carmaker General Motors has announced it will shut down its Opel factory in St. Petersburg and withdraw its Germany-based subsidiary from the Russian market. GM expects to be hit by a record charge as a result.

General Motors (GM) and its German subsidiary Opel issued a statement on Wednesday, announcing a change to the group's business model in Russia, including the closure of its Opel factory in St. Petersburg.

GM President Dan Ammann said in the statement that the decisions would avoid "significant investment into a market that has very challenging long-term prospects."

Moreover, the US car giant would completely withdraw its Opel brand from the Russian market, where sales had been falling amid slow consumer spending due to Western sanctions over Ukraine and a depreciating ruble.

New car sales in Russia dropped 38 percent year-on-year in February, according to latest industry figures. Opel was among the hardest hit, with business plunging a whopping 86 percent.

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Focus on premium cars

GM's Opel plant in St. Petersburg, which employs 1,000, would halt production by the middle of 2015, GM said in the statement, and assembly of the group's Chevrolet vehicles at Russian car factory GAZ would also cease this year.

"GM will focus on the premium segment of the Russian market with Cadillac and ... products such as the Corvette, Camaro and Tahoe," the world's third largest auto maker announced.

Opel Chief Executive Karl-Thomas Neumann explained: "We do not have the appropriate localization level for important vehicles built in Russia and the market environment does not justify a major investment to further localize."

Neumann also said that GM had to take "decisive action" in Russia to protect Opel's business as the German subsidiary was looking to "return the European business to profitability in 2016."

As a result of the decision, GM said it expected to record net special charges of up to $600 million (566 million euros) primarily in the first quarter of 2015, including dealer restructuring, contract cancellations and severance-related costs.

uhe/pad (AFP, Reuters, dpa)

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