GM Breaks Ground for St. Petersburg Plant Expansion

VIENNA – General Motors Chairman and CEO Dan Akerson attends the official groundbreaking ceremony for the expansion of the GM Auto car plant in St. Petersburg, Russia Friday.

GM Auto, GM’s wholly owned subsidiary, will increase its annual production capacity from the current 98,000 units to 230,000 by 2015. Employment will increase from the present 2,500 to 4,000.

The project is the most significant development for the auto maker’s Russian operations since GM Auto opened in 2008.

“General Motors is embarking on a new era in Russia, one of the world’s fastest-growing vehicle markets, as part of our strategy to build where we sell,” Akerson says in a prepared statement. “Our growing investment is the strongest possible endorsement by General Motors of our intent to make Russia a significant part of our international operations.”

The St. Peterburg plant currently builds Chevrolet Cruze sedans and hatchbacks, as well as Opel Astra hatchbacks for the Russian market. “Among the additional vehicles that will be produced at GM Auto is the new Opel Astra sedan, which will make its worldwide debut in August,” the auto maker says.

GM plans to spend $1 billion in Russia over the next five years. No information about the specific investment in the St. Petersburg facility is being disclosed. But part of the money will go toward boosting capacity at GM-AvtoVAZ, the joint venture with Lada manufacturer AvtoVAZ in Togliatti to 120,000 vehicles annually.

GM-AvtoVAZ currently builds Chevrolet Niva small cross/utility vehicles. Plans call for production of the next-generation Niva and the new Lada 4x4 at the AvtoVAZ facility. Both vehicles launch in 2015.

At least $100 million will be invested in the expansion in Togliatti, the regional newspaper Samarskoye obozreniye reports.

GM-AvtoVAZ’s capacity increase will mean several hundred additional jobs, Jim Bovenzi, president and managing director-GM Russia and Commonwealth of Independent States, told the Russian business daily Vedomosti last year.

GM-AvtoVAZ is owned 41.6% each by GM and AvtoVAZ, while the European Bank for Reconstruction and Development holds 16.8%. EBRD wants to sell its stake and is in negotiations with its two partners.

“We are hoping to close the deal this year,” Richard Wallis, EBRD’s spokesman in Russia, tells WardsAuto. Following finalization of the sale, GM and AvtoVAZ each will own 50% of the JV.

The expansion of the facilities in St. Petersburg and Togliatti will result in combined capacity of 350,000 vehicles annually, in accordance with the government’s new vehicle- production regulations also known as New Decree 166.

GM is among four foreign auto makers that last year signed the New Decree 166 agreement relating to customs duties benefits with the Russian government. The other companies are Ford, Volkswagen and the Renault-Nissan Alliance.

One of the terms of the new Decree 166 calls for at least 30% of future vehicles built in Russia to be equipped with locally manufactured engines and transmissions. Ford and VW plan to construct new engine plants, while Renault will partner with AvtoVAZ to produce Renault engines.

GM plans to fulfill this condition with Russian-made engines to be installed in the new Niva and Lada models. The engines may be sourced from AvtoVAZ, as the current Niva is powered by a 1.7L AvtoVAZ gasoline engine.

In addition to the plants in St. Petersburg and Togliatti, Gruppa GAZ will launch contract assembly of the Chevrolet Aveo at its plant in Nizhny Novgorod later this year.

Several GM models are built by contract-assembler Avtotor. The Kaliningrad-based company builds the Chevrolet Lacetti from complete-knocked-down kits and builds Cadillacs, Korean Chevrolets and European Opels from semi-knocked-down kits.

Avtotor plans to switch much of its assembly operations to CKD within the next few years. GM’s long-term plans for cooperation with Avtotor are not known. “We will continue to work with Avtotor on a contract basis in the foreseeable future,” Bovenzi said last year.

GM sold 107,837 vehicles in Russia through May, up 22.1% from like-2011. Total volume comprised 74,788 Chevrolets, 32,064 Opels and 985 Cadillacs.

In addition, 32,190 Daewoo-badged cars, manufactured at the General Motors Uzbekistan JV plant, were sold by an independent distributor through May. Deliveries were down 9.9% compared with year-ago.