GM opens first Russian factory in St. Petersburg

The Russian plant will build the Chevrolet Cruze.

STAFF/WIRE REPORT

ST. PETERSBURG, Russia — U.S. car giant General Motors Corp. launched its first Russian assembly plant Friday, hoping that sales in this emerging market will bolster its staggering global performance.

As the world’s largest carmaker was to set to post gloomy third-quarter earnings, GM executives were basking in the praise of Russian authorities attending the opening of the $300 million, 70,000-car-a-year factory outside St. Petersburg.

President Dmitry Medvedev thanked GM “for all the work they have done” and described the new factory as a “good investment project that looks into the future.”

Two types of sports utility vehicle, often seen as the symbol of the Russian rich, the Opel Antara and the Chevrolet Captiva, will start immediately.

The plant will start assembling the Chevrolet Cruze compact sedan in 2009, according to a report on CNBC.com. The plant is expected to supply the Cruze to Europe.

The Cruze is expected to be launched in North America in 2010. It will be built at GM’s Lordstown complex.

GM, which has long had various joint manufacturing ventures in Russia, joins a long line of major international carmakers that have opened domestic plants to tap the growing consumer market.

Ford and Toyota have both opened plants in the St. Petersburg region and Hyundai, Nissan, and Suzuki are launching production in coming years. All manufacturers, including Peugeot Citroen and Mitsubishi Motors, are opening a factories in other regions near Moscow.

Before the financial crisis struck, Russia’s car market was on track to become Europe’s largest. Now, loans for cars have dried up, and, coupled with financial uncertainty, car sales have fallen by almost half, according to the Association of European Businesses in Russia.

GM is positioning itself to take advantage of this restructuring, said GM’s Russia spokeswoman Anges Rona said.

“Judging from how fast Russian carmakers are curtailing production, General Motors could become number one on the market in two years’ time,” she said.

“Russia is still seeing growth,” said Mikhail Pak, an analyst with Metropol investment bank in Moscow. “Other markets such as North America and Europe are tumbling 20 to 25 percent.”

Demand for cheap, well-built cars has exploded in Russia in recent years amid an oil-fueled economic boom. The yearlong waiting list to buy the popular Ford Focus has become a symbol of Russia’s nascent middle class.

In a sign of how the crisis is pinching Russian consumers, waiting time for the Focus has recently gone down to 3 months, said Igor Ponamarev, an executive with Ford’s official dealer in Russia.

Observers say the first quarter on 2009 will be difficult for Russian dealers and producers.

“We may see a slowdown in the next six months, but when the situation economic stabilizes and car loans become more available, the market will keep growing,” Pak said. “Russia will definitely become Europe’s largest car market — if not this year, then next year.”