General Motors Company (GM) announced that it has halted the delivery of vehicles to dealerships in Russia. The automaker was forced to undertake this step due to the volatility in the ruble exchange rate.
General Motors’ European branch, Opel undertakes its Russian operations. Opel decided that in order to manage the risk associated with the decrease in ruble exchange rate, the automaker will temporarily suspend wholesaling of its vehicles to the dealers in Russia.
The decrease in ruble can lead to a loss for Western companies due to negative currency translation effect. However, General Motors stated that the Cadillac, Opel and Chevrolet vehicles which have already been purchased, will be delivered at the agreed price.
General Motors occupies a dominant position in Russia, as it sells more vehicles here compared to any other U.S. automaker. However, its Russian sales volume accounts for only a very small portion of the company’s global sales. In the first 11 months of the year, the automaker has sold 170,000 vehicles under the Chevrolet, Opel and Cadillac brands in Russia, according to the Association of European Businesses.
Apart from General Motors, other automakers and companies in other sectors too are facing challenges due to the volatility in the ruble exchange rate. Tata Motors Limited’s (NYSE:TTM) business segment, Land Rover-Jaguar has also suspended its sales in Russia. On the other hand, BMW has raised prices in Russia to offset the fall in value of the ruble. Apple Inc. (AAPL) also closed its online store in Russia due to the currency fluctuations.
The recent decline in ruble resulted from the drop in oil price. Oil generates a significant amount of revenue for the Russian government.
Currently, General Motors carries a Zacks Rank #3 (Hold). A better-ranked stock in the same general industry worth considering is Harley-Davidson, Inc. (NYSE:HOG)), carrying a Zacks Rank #2 (Buy).