AJOT Digital Edition
Issue #583 | Forest Products

Cover of issue-583.png

Forest Products

View Issue #583 Now!

2014 Media Kit
  • Share this article:

GM breaks ground on new car plant outside St. Petersburg

By: | at 08:00 PM | Channel(s): International Trade  

General Motors Corp. broke ground on its first fully owned plant in Russia on June 13, accelerating the rush by foreign automakers to take advantage of the fast-growing, oil-rich country’s burgeoning car market.

GM Chairman and CEO Rick Wagoner and St. Petersburg Governor Valentina Matviyenko stuck spades through a hole in the floor of a blue-and-white tent and shoveled dirt at the site of the new plant in a sandy field in Shushary, on the southern outskirts of St. Petersburg.

“While St. Petersburg is sometimes called the Venice of the North, I think the governor and I agree it may soon be called the Detroit of the North,” Wagoner said.

Matviyenko called the GM project “convincing evidence of our country’s inclusion in the world economic process.”

The ceremony came just months after a noisy dispute between GM and Russian auto giant AvtoVaz over their US$340 million (euro270 million) joint venture in the central Russian city of Togliatti and a failed agreement over building an engine plant in the city of Samara last year.

Last year, AvtoVaz was effectively taken over by state-controlled arms export agency, Rosoboronexport, leading many observers to speculate that the Kremlin was trying to reassert control over the Russian automobile industry.

The GM plant at Shushary will be the latest in a slew of foreign car factories springing up in Russia, where the Ernst & Young consulting firm has estimated that the market grew by 14.4% last year to 1.84 million vehicles per year. Sales of new foreign cars rose 60% in 2005 to 563,400.

Last month, Volkswagen AG signed an agreement with the Russian government to build a US$500 million (euro397 million) plant in Kaluga, southwest of Moscow, that will produce 115,000 vehicles a year.

Three other foreign car companies launched plants in Russia last year: France’s Renault SA, and South Korea’s Kia Motors Corp. and Japan’s Toyota Motor Corp., whose plant is near the GM site. Ford Motor Co. has a factory near St. Petersburg.

The GM plant will go on line in late 2008, initially producing 25,000 units of the Chevrolet Captiva sport utility vehicle per year and later turning out a new compact car, GM Europe President Carl-Peter Forster said. In September, he said, GM will open a temporary plant in northern St. Petersburg that is to build 4,000 Captivas annually.

Forster would not name any prices.

Also on June 12, Japan’s Nissan Motor Co., signed a memorandum of understanding with the city of St. Petersburg and the Economic and Trade Ministry on a 50,000-vehicle assembly plant, Russian media reported. Economic Development and Trade Minister German Gref said total investment in the plant would be US$200 million (euro160 million), Interfax reported.

Matviyenko said Nissan had chosen the suburb of Kamenka, “a convenient location as concerns the European Union, a port on the Baltic Sea, well-developed logistical structure, qualified personnel and transport opportunities,” ITAR-Tass reported.

Russia’s former imperial capital has sought to lure investors by providing tax breaks and infrastructure and cast itself as a gateway for international trade. Tuesday’s events came amid an economic forum and ahead of a Group of Eight nations summit next month that will be hosted by President Vladimir Putin, a St. Petersburg native.

Soaring world oil prices have boosted Russia’s economy, lifting living standards and enabling more people to buy cars—and avoid rickety domestic models—in a country where they were long considered a luxury.

According to the European Bank for Reconstruction and Development, Russia has about 157 cars per 1,000 people—on par with Argentina but far below the Polish figure of 250.

Speaking at the ceremony in the sweltering tent surrounded by shiny new models of the five GM brands sold in Russia—Hummer, Saab, Cadillac, Opel and Chevy—US Ambassador William Burns put in a word for diversification of Russia’s energy-driven economy.

“This project is a powerful reminder that what Russia can offer the world