GM to shut Russian plant as sales slide

(GNN) - General Motors Co (GM.N) will shut a Russian factory and wind down its Opel brand in the country, taking a $600 million charge as it restructures to cope with a prolonged slump in the once-promising market, the U.S. carmaker said on Wednesday.

After several years of growth in excess of 10 percent, car sales in Russia shrank in 2014 as the economy weakened, battered by Western sanctions over the Ukraine crisis and sliding oil prices. The tumbling value of the rouble has caused consumers to pull back on large purchases, and raised the cost to GM and other manufacturers of importing parts.

GM’s retrenchment in Russia is the latest in a series of moves by global automakers to scale back money-losing bets on emerging markets that have failed to live up to the bullish expectations industry executives subscribed to earlier in the decade.

Last month, GM said it would close a factory in Indonesia and scale back operations in Thailand. Ford Motor Co (F.N) took an $800 million charge earlier this year to restructure troubled operations in Venezuela.

GM said it would stop production by the middle of 2015 at its St. Petersburg plant which makes the Chevrolet Cruze, Opel Astra and Chevrolet Trailblazer models. The idling of the plant will mean the loss of 1,000 jobs.

GM also will wind down the Opel brand in Russia by December, and stop assembling mass-market Chevrolet cars at GAZ (GAZA.MM), a Russian vehicle factory, to concentrate on premium car sales. GM said it would continue to assemble the current generation of Chevrolet Niva sport utility vehicles at a joint venture with Russian automaker Avtovaz OAO.

"This decision avoids significant investment into a market that has very challenging long-term prospects," GM President Dan Ammann said in a statement.

Just four years ago, GM said its Russian operations were gearing up to expand production capacity to 350,000 vehicles a year, and called Russia “an important strategic market.”

FOCUS ON PREMIUM SEGMENT

Going forward, GM said it will focus on the premium segment in Russia, which has held up better than the mass market, with Cadillac and some U.S.-built Chevrolet cars. Russia accounted for 1.9 percent of GM's global sales in 2014, down from 2.6 percent in 2013. The automaker does not break out financial results for the country, but consolidates Russian operations with its GM Europe unit.

GM Chief Executive Mary Barra has said Opel would regain profitability by 2016, and the company reaffirmed that forecast on Wednesday. The charge will primarily hit results for this year's first quarter, GM said.

Volatility in Russia has hit other automakers. Ford has cut jobs at its joint venture factory in Russia, and Nissan Motor Co Ltd (7201.T) earlier this week said it would halt production at its St. Petersburg plant for 16 days.

Russia's Economy Ministry said late on Wednesday that no other foreign car company that operates an assembly line in Russia has said it would leave the market, according to RIA news agency.

"The Ministry of Economic Development of Russia cannot agree with the assessment of the market by one individual company," RIA cited the ministry's spokeswoman as saying.

Russian industry and trade ministry officials, quoted by RIA, said GM suffered because it imported more than half of the parts for its cars. Renault-Nissan and Volkswagen AG (VOWG_p.DE) source about two-thirds of car parts within Russia for the cars they assemble there.

RUSSIAN MARKET SHRINKS

The Russian car market is forecast to shrink by up to 35 percent in 2015 according to PricewaterhouseCoopers.. The Russian Economy Ministry said it expects the domestic car market to return to growth in 2016.

But analysts say Russia is in for tough times.

"At least 70 percent of cars currently sold in Russia are sold at a loss. Auto groups only stay in this market to protect their share in anticipation of growth," said Oleg Datskiv, general director of online automobile portal Auto-dealer.ru.

Opel sold 912 vehicles in Russia in February, an 86 percent plunge from year-ago levels, said a spokesman at Opel’s base in the German town of Ruesselsheim.

The Opel Astra has a starting price of about 800,000 rubles ($13,000) in Russia.

(Reuters)(Additional reporting by Andreas Cremer in Berlin, Ben Klayman and Joe White in Detroit and Lidia Kelly in Moscow; Editing by Elizabeth Piper Elaine Hardcastle and Matthew Lewis)

GM to shut Russian plant as sales slide

(GNN) - General Motors Co (GM.N) will shut its Russian factory and wind down its Opel brand in the country, taking a $600 million charge as it restructures its business to cope with a deepening downturn, the U.S. carmaker said on Wednesday.

After several years of growth in excess of 10 percent, car sales in Russia shrank in 2014 as the economy weakened because of Western sanctions over the Ukraine crisis and a slide in oil prices.

The rouble also tumbled last year, making consumers think twice about large purchases and manufacturers find ways to cut costs.

The U.S. carmaker said it would stop production at its St. Petersburg plant which makes the Chevrolet Cruze, Opel Astra and Chevrolet Trailblazer models by the middle of 2015. The closure of the plant will mean the loss of 1,000 jobs.

It will wind down the Opel brand by December and stop assembling mass-market Chevrolet cars at GAZ (GAZA.MM), a Russian vehicle factory, to concentrate on premium car sales.

"This decision avoids significant investment into a market that has very challenging long-term prospects," GM President Dan Ammann said in a statement.

Russia's Economy Ministry said late on Wednesday that no other foreign car company having an assembly line in Russia has said it would leave the market, RIA news agency reported.

"The Ministry of Economic Development of Russia cannot agree with the assessment of the market by one individual company," RIA cited the ministry's spokeswoman as saying.

GM said it would take around $600 million in special charges related to the reorganization of the Russian business, primarily in the first quarter of 2015.

Russia accounted for 1.9 percent of GM's global sales in 2014, down from 2.6 percent in 2013.

RUSSIAN MARKET SHRINKS

The Russian car market is forecast to shrink by up to 35 percent in 2015 according to PricewaterhouseCoopers.. The Russian Economy Ministry said it expects the domestic car market to return to growth in 2016.

"The (growth) results can be undoubtedly achieved," the ministry said, adding that the government's so-called anti-crisis program aimed at supporting domestic companies as well as other forms of state support will help.

But analysts say Russia is in for tough times.

"At least 70 percent of cars currently sold in Russia are sold at a loss. Auto groups only stay in this market to protect their share in anticipation of growth," said Oleg Datskiv, general director of online automobile portal Auto-dealer.ru.

GM said it would focus on the premium segment in Russia, which has held up better than the mass market, with Cadillac and some U.S.-built Chevrolet cars.

Opel sold 912 vehicles in Russia in February, an 86 percent plunge on year-ago levels, said a spokesman at Opel’s base in the German town of Ruesselsheim.

Opel has raised prices several times to cope with the weak rouble, which fell more than 40 percent against the dollar in 2014, causing volumes to plunge and losses-per-vehicle to rise, the spokesman said.

Compared to some other foreign brands, Opel is hurt by a low level of integration into the local market. It imports more than half of all parts needed to assemble cars there.

By contrast, around 75 percent of car parts for Renault-Nissan (RENA.PA) (7201.T) vehicles sold in Russia come from local suppliers. This rate stands at about 60 percent for Germany's Volkswagen (VOWG_p.DE).

(Reuters)(Additional reporting by Andreas Cremer in Berlin, Ben Klayman in Detroit and Lidia Kelly in Moscow; Editing by Elizabeth Piper and Elaine Hardcastle)

Volkswagen hit by second Chinese state television exposé in one week

(GNN) - China's main state-owned television network struck out against Volkswagen AG (VOWG_p.DE) in its second exposé targeting the firm this week, alleging this time that the company overlooked dangerous engine leaks in its Chinese cars.

Foreign firms like Volkswagen that dominate certain sectors of the Chinese market can be particularly vulnerable to exposés that hold sway over consumers and can drag down sales.

The China Central Television (CCTV) segment on Wednesday alleged that Volkswagen customer service and dealerships ignored complaints of oil leaks pooling in the engine tray, an issue that third-party experts said could be a fire hazard.

"We are aware of media reports regarding an engine oil issue, and we sincerely apologize for any inconvenience caused to our customers," Volkswagen spokeswoman Larissa Braun said in an emailed statement.

"We take such reports very seriously and have already launched an investigation into the matter."

The company will issue further information as soon as possible, she said.

"[The report] does pass the sniff test," said James Feldkamp, CEO of Shanghai-based consumer watchdog MingJian.

Volkswagen has recalled more than 93,000 2014 and 2015 models globally, including some models from subsidiaries Audi and Porsche, over fuel leak issues as well as nearly 38,000 in the United States, Feldkamp said.

"It looks entirely plausible that the engine problems they're having with the leak are more widespread than originally reported," he said.

CCTV said it found complaints of engine leaks in Volkswagen cars in Shanghai, Beijing and at least eight of China's provinces. The report mentioned Magotan sedan and Tiguan SUV models.

When the owners featured in the program contacted dealers or Shanghai Volkswagen customer service, they were told such leakages were normal.

In 2013, CCTV reported on Volkswagen transmission gearboxes causing cars to speed up or slow down. That report spurred a recall.

The exposé follows on CCTV's annual "3.15" consumer rights day investigative special aired on Sunday that alleged Volkswagen, Nissan Motor Co (7201.T) and Daimler AG's (DAIGn.DE) Mercedes Benz dealerships oversold repair services and parts that drivers did not need.

McDonald's Corp (MCD.N), Apple (AAPL.O) and Starbucks (SBUX.O) have all been subjects of CCTV 3.15 exposés in the past.

China is the world's largest auto market, and Volkswagen, through its joint ventures with SAIC Motor Corp (600104.SS) and FAW Group, was the country's top selling automaker in 2014.

Chinese regulations only allow foreign firms to manufacture cars through joint ventures and restrict them to a 50-percent ownership cap.

(Reuters)(Reporting by Jake Spring; Additional reporting by Paul Carsten in BEIJING; Editing by Ryan Woo and Gopakumar Warrier)

Toyota Lexus to recall some 2006-2011 models due to fuel leak

GNN - Toyota Motor Corp (7203.T) will recall 422,509 of its luxury brand Lexus vehicles in the United States because of a possible fuel leak that increases the risk of fire, U.S. regulators said on Friday.
The recall covers Lexus LS from model years 2007 to 2010, Lexus GS from 2006 to 2011 and Lexus IS from 2006 to 2011.

The National Highway Traffic Safety Administration said fuel might leak where the fuel pressure sensor is attached to the fuel delivery pipe. If a spark occurs, fire could start.

Toyota told the NHTSA that it was not aware of any fires or injuries caused by this condition.

Beginning next month, Toyota is to notify owners of various versions of the three models affected and tell them to bring their vehicles into dealerships for repair.

(GNN , Reuters, Aip)(Reporting by Bernie Woodall; Editing by Lisa Von Ahn)

GM ignition switch fund gets 63 death case claims

#GNN - The lawyer overseeing a General #Motors Co (GM.N) fund set up to compensate victims of accidents caused by faulty ignition switches in its cars said he received claims for cases involving 63 deaths.

Kenneth Feinberg, who is overseeing the fund, also told Reuters that since the fund was set up a week ago 65 others had filed physical injury claims as of Friday afternoon. However, he added that the death claims had not yet been confirmed as being eligible for compensation.

Feinberg, who started taking claims from Aug. 1 and will continue until Dec. 31, will determine the number of claims eligible for payments and final payouts.

GM earlier this year recalled 2.6 million cars for the faulty ignition switches, which can cause engine stalls and stop power steering and power brakes from operating and air bags from deploying. It has also admitted not fixing the problem for a decade.

The number of death claims represents nearly five times the 13 deaths that GM has attributed to the defective switches.

The Detroit-based automaker has set aside $400 million to cover victims' claims, but the amount could grow because the fund is not capped.

Lawyers for various plaintiffs have said several dozen deaths may ultimately be attributed to the switches.

The payouts from the compensation fund for eligible claims are expected to be completed by the second quarter of 2015, Feinberg said in June, adding that the families for those who died would likely be awarded at least $1 million.

Feinberg has previously handled a compensation fund for victims of the Sept. 11, 2001, attacks, and a BP Plc (BP.L) fund for victims of the April 2010 Gulf of Mexico oil spill.

(GNN)(Reuters)(AIP)(Reporting by Avik Das in Bangalore and Julia Edwards in Washington; Editing by Bernard Orr and Ken Wills)

Exclusive: Prosecutors' case against GM focuses on misleading statements

(GNN) - Federal prosecutors are developing a criminal fraud case hinged on whether General Motors made misleading statements about a deadly ignition switch flaw, and are examining activity dating back a decade, before GM's 2009 bankruptcy, according to multiple sources familiar with the investigation.

At the same time, at least a dozen states are investigating the automaker. Two state officials said that effort is likely to focus on whether GM broke consumer protection laws.

Both federal and state investigations into the switch, which is linked to at least 13 deaths and 54 crashes, are at early stages, and it is possible that cases may not be brought.

Sources said federal criminal prosecutors are working on a set of mail and wire fraud charges, similar to the criminal case Toyota Motor Corp settled earlier this year over misleading statements it made to American consumers and regulators about two different problems that caused cars to accelerate even as drivers tried to slow down.

Delphi Automotive, the maker of the GM switch, is not a target of criminal charges, the people said, because it did not make substantial public statements about the safety of the vehicles or the part. That would make it difficult to build a case under the main federal fraud laws, the wire and mail fraud statutes.

Greg Martin, a spokesman for GM, said his company continued to work with investigators, declining to comment further, and a spokeswoman for Delphi said the company had been told it was not a target of investigations and was working cooperatively with all government officials. A spokesman for Manhattan U.S. Attorney Preet Bharara, who is leading the criminal probe, declined to comment.

Prosecutors are not limiting their inquiries to events that occurred after GM emerged from bankruptcy in 2009, sources said. Legal experts said bankruptcy does not release GM from criminal liability in a fraud case.

It is not clear whether prosecutors will bring cases against any individuals.

GM has said 15 people were forced out for their roles in the automaker' s failure to act for more than a decade on signs of the deadly defective switch, which can be jarred out of the "run" position and deactivate power steering, power brakes and air bags.

GM Chief Executive Mary Barra has said she was not aware of the scope of the problem until January of this year.

The National Highway Traffic Safety Administration already fined GM $35 million in May for its delayed response to the defective part, and accused company officials of concealing the problem.

FINDING FRAUD

As they did in their case against Toyota, U.S. Attorney Bharara's team will try to show that people inside GM knew of the deadly defect even while they were telling regulators the problem was contained and issuing directions to the public about how to handle a car that had lost power.

The statement of facts in the Toyota case offers a potential template for the GM case, and one legal expert said GM could end up paying more than Toyota, which settled for $1.2 billion. There are no caps on the penalties that could be imposed on entities guilty of mail fraud or wire fraud.

"If the General Motors people think - especially with all the publicity, and the congressional hearings, and all of the public scrutiny that has been brought to bear on this - that $1.2 billion is a number that's going to resolve all of this, they may well be mistaken," said C. Evan Stewart, a defense lawyer at Cohen & Gresser and former special assistant district attorney for Manhattan.

Prosecutors said Toyota internally acknowledged a "material" problem in which some vehicles' pedals could get trapped under floor mats or stuck in a partially depressed position, but that the company downplayed the problem to NHTSA.

Lawyer Anton Valukas, who was hired by GM to investigate the switch matter, details what he called a “history of failures” to address the problem and inform the public of dangers.

His report included numerous examples like a 2005 notice to dealers, directing them to tell customers to remove unessential items from their key chains. After internal discussions, GM eliminated the word "stall" from the notice because of concerns that the word could worry customers about vehicle safety, the report said.

Two years later, according to a filing this year in a class action suit against GM, the company told NHTSA it saw "no specific problem pattern" in crashes of cars it already knew to have an ignition switch problem, where airbags failed to open.

Furthermore, during GM's bankruptcy proceedings, the company was required to file disclosures to the court about its potential liabilities and known creditors. It did not include any of the people with active legal claims against the company based on ignition switch problems in its list, according to the court filing.

SALES PRACTICES

The states' investigation is likely to focus on whether state consumer fraud laws have been violated, targeting unfair and deceptive acts and practices, said William Brauch, director of the consumer protection division at the Iowa Department of Justice.

"Multi-state investigations of this kind typically focus on consumer protection related issues," added Whitney Ray, a spokesman for Florida Attorney General Pam Bondi.

Arkansas, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Nevada, New York, and South Carolina are all probing GM, representatives said.

Brauch said the states have conducted similar investigations in the cases of Firestone tires, Ford SUV rollovers and unintended acceleration in Toyota vehicles.

Brauch, who is a special assistant attorney general in Iowa, said the AGs might probe whether the manufacturer misrepresented a facet of a product in its advertising, or failed to disclose a known defect.

"Our laws allow us to take action in connection with omissions of material fact," Brauch said. "Simply putting a defective product in the stream of commerce can, under certain circumstances, constitute unfairness in the consumer fraud laws."

He said he did not believe the states had yet sent GM a demand for information, which is similar to a civil subpoena.

Last year, a group of 29 states struck a $29 million settlement with Toyota. The states accused Toyota of engaging in unfair and deceptive practices when it didn't disclose known safety defects with accelerator pedals.

"Toyota is probably a good model to look at in the context of what state attorneys general have done in the past in connection with alleged problems in new vehicles," said Brauch. "Is it directly parallel? We don't know yet."

(Reuters)(GNN - AIP)(Reporting by Emily Flitter and Karen Freifeld, with additional reporting by Nick Brown and Tom Hals; Editing by Karey Van Hall and Peter Henderson)

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