Add this to the list of eye-catching news coming out of Venezuela as the country is engulfed by economic and political chaos: GM, one of America’s largest companies, was just forced to shut down its operations in the country after the Venezuelan government abruptly seized control of its car factory there.
In a statement, GM said the move was an "illegal judicial seizure of its assets" and that it expected to “vigorously take all legal actions, within and outside of Venezuela, to defend its rights.” The American car company said authorities took over the factory on Wednesday and started taking cars from it.
The Venezuelan government has not commented yet on the matter, and so far there aren’t many details on why it happened. The New York Times reports that, according to the head of corporate and government relations for GM in Venezuela, the government took over the company after GM asked for help dealing with a union-led takeover of the factory for the past several weeks. GM wanted assistance in pushing out the union occupation, but instead the government just took over the factory, in his description.
“In other words, we are twice out of control of our plant,” Enrique Tahan, the GM official, said, according to the Times. GM says that the plant had stopped making cars recently, presumably due to deteriorating economic conditions. Many international companies like Pepsi have been taking huge losses in Venezuela due to inflation and shortages of materials over the past year.
The seizure comes at a time of great turmoil for the embattled government of President Nicolás Maduro. The country’s Supreme Court recently attempted to strip the opposition-controlled parliament of its powers, sending hundreds of thousands of protesters into the streets of Caracas and other major cities. The country remains mired in a deep economic crisis, with sky-high unemployment and inflation expected to rise over 700 percent this year.
The move shouldn’t come as a shock. Venezuela’s socialist government has nationalized significant swathes of the private sector before, which has involved picking confrontational and often costly legal battles with large foreign companies like Exxon. Under former President Hugo Chavez, for instance, the government seized Spanish-owned banks and American rice mill.
Maduro has also made bids to nationalize private companies. Last summer, the Maduro government seized a plant owned by US personal care giant Kimberly-Clark Corp, renamed it after local indigenous warrior known for battling Spanish colonial authorities, and declared the facility to be reborn “in the hands of the workers.”
The government’s anti-corporate rhetoric aside, the move may have been more of an attempt to save face after the factory halted its operations days before the seizure due to a lack of raw materials, and laid off nearly a thousand workers.
The Venezuelan government had said that Kimberly-Clark Corp failed to consult with them before letting go of the workers. According to ABC, Maduro accused the foreign corporation “of participating in an international plot to damage Venezuela's economy,” and said the government would step in to provide funds to compensate for lost salaries.
In 2007, Exxon decided to cease operations in Venezuela after then-President Chavez tried to nationalize some of its assets there. Since then, Exxon and Venezuela have been locked in a long legal battle, with the latest international tribunal ruling in favor of Venezuela, who won an appeal on a $1.4 billion payment to Exxon Mobil in March.
Given how poorly the economy is fairing today, an attempt by the Venezuelan government to spin this as a boon to Venezuelan workers is likely to fall on deaf ears.