CARACAS, Venezuela -- General Motors Co. became the latest multinational company to exit what used to be South America's most lucrative consumer market, following the seizure of its plant linked to a court case.
Venezuelan authorities on Wednesday unexpectedly took over GM's plant in the central Carabobo state, seizing production facilities and car stock, the company said in a statement. GM, the world's third-largest car maker, said it has been forced to lay off its 2,700 Venezuelan workers.
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"It gives me immense sadness to see the collapse of so many years of work," said a GM executive in Venezuela.
The Venezuelan government, which frequently blames big business for the country's economic crisis, hasn't publicly commented on the move, which took place amid deadly nationwide antigovernment protests.
A top Venezuelan industrial policy maker said the seizure is a private matter between two companies.
"This has nothing to do with the Venezuelan state," said the official. He added that the government is now working to resolve the conflict.
GM said the seizure was triggered by a provincial court embargo in favor of a former local dealer who sued the company for about $370 million in 2000 over contract disagreements.
GM denied any wrongdoing linked to the case, called the embargo "absurd" and said the demanded sum "exceeds all the logic."
The company "strongly rejects the arbitrary measures taken by the authorities and will vigorously take all legal actions, within and outside of Venezuela, to defend its rights," GM said.
The ruling party of Nicolás Maduro and his predecessor Hugo Chávez has nationalized more than 1,400 companies and private assets since taking power in 1999, according to industry group Conindustria. The vast bulk of the seized companies have since closed, contributing to an unprecedented economic crisis rocking the country.
News of the closure of what was once the pride of Venezuela's manufacturing caused more indignation on the streets of eastern Caracas, where thousands of antigovernment demonstrators gathered Thursday for the latest in a series of protests calling for an end to 18 years of Socialist rule.
"This expropriation will just make everything worse," said 71-year-old protester Raul Guevara.
The company's decision to immediately quit the country after 70 years following the court embargo shows just how big a liability Venezuela's collapsing economy has become for the few multinational firms still operating here.
GM's Venezuelan plant hasn't produced any cars since 2015, according to the local car industry association Cavenez.
Company managers in Venezuela said they haven't been able to obtain hard currency to import parts through the country's labyrinthine currency controls for years. Meanwhile, the company had to continue paying its 2,700 staff.
"These companies are characterized by production done at a loss," said Richard Obuchi, management professor at Caracas's IESA business school and author of a book on Venezuela's state controls. "Products that should be produced aren't."
The seven private manufacturers that make up the Cavenez car manufacturers' association saw production fall 84% in 2016 compared with the previous year. In the first two months of 2017 they produced just 240 vehicles in a country of almost 30 million people.
In good times Venezuelan car plants produced up to 20,000 vehicles a month, according to Cavenez.
"What's happened with the car sector here is sad," said Francisco Martinez, head of Venezuela's largest business group Fedecamaras. The authorities "have blocked the possibility of producing."
The resulting car shortage is a bitter irony in a country with the world's cheapest gasoline. One buck converted on the street fetches more than 100 gallons of fuel.
"You can't even enjoy the benefit," said Caracas protester Francisco Rodriguez, a 64-year-old industrial engineer.
GM follows foreign manufacturers from Clorox Co. to Kimberly-Clark Corp. who in recent years have halted production and walked away from their Venezuelan plants, after a government intervention.
Mr. Maduro has repeatedly said that every idled plant would be "recuperated by the Revolution."
In 2014, GM's rival Ford Motor Co. wrote off $1 billion of assets that it held in unconvertible Venezuelan currency. Ford's Venezuelan plant, which is now also idled, is no longer featured in its consolidated financial results.
The corporate exodus from Venezuela is a striking reversal for an oil country that defined Latin American conspicuous consumption to the world through its lavish soap operas.
Venezuela had the highest household consumption per capita in South America as recently as 2007, according to the World Bank. Today, a quarter of the population eats less than three meals a day, according to a recent survey by three major Venezuelan universities.
--Juan Forero in Caracas and Christina Rogers in Detroit contributed to this article.
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(END) Dow Jones Newswires
April 20, 2017 19:12 ET (23:12 GMT)