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General Motors Company (
- Analyst Report
is planning to invest $1 billion in its production units in Russia over the next five years, according to Reuters. This initiative will increase production of cars and components in one of the fastest-growing auto markets in the world.
The company makes cars in its Kaliningrad, St. Petersburg and Togliatti plants in Russia. The investment is aimed at boosting output capacity and sourcing local components. The St. Petersburg plant, which manufactures the Chevrolet Cruze sedan and the Opel Astra hatchback, will be also producing Astra sedan following the expansion.
General Motors also plans to increase the production of Chevrolet Niva sport utility vehicle, which is being manufactured through its joint venture with Russia's AvtoVaz. This would escalate the Chevy Niva production to 120,000 units from 70,000 units. With this, the company will be producing 350,000 vehicles in Russia annually.
Last year, car sales in Russia went up 40% to 2.5 million units. Although growth has decelerated this year, General Motors, which is the second largest car-selling company in Russia, anticipates further growth in production. The company plans to increase production to 230,000 vehicles per year in its St. Petersburg plant.
General Motors, in the second quarter of 2012, registered a 41% decline in its profit to $1.49 billion or 90 cents per share from $2.52 billion or $1.54 in the corresponding quarter of 2011. Nevertheless, earnings per share exceeded the Zacks Consensus Estimate by 15 cents.
Total revenues fell 4.5% year over year to $37.60 billion in the quarter, missing the Zacks Consensus Estimate of $37.98 billion. The declines in the profit and revenues were attributable to the strengthening of the U.S. dollar against most of the major currencies as well as weak macroeconomic conditions globally, especially in Europe and South America.
Like its competitor Ford Motor Co. ( F - Analyst Report ) , the company's significant exposure to troubled Europe has adversely affected its operations in the continent. Currently, General Motors retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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