September 26, 2017 / 8:41 PM / in a year

UPDATE 1-U.S.-based Axalta halts Venezuelan operations, cites 'political situation'

(Adds details on halt; adds background on company and context)

By Corina Pons

CARACAS, Sept 26 (Reuters) - U.S. paint manufacturer Axalta Coating Systems has halted production in Venezuela because of the country’s “economic and political situation” and has laid off its workers, according to employees and a company statement.

Foreign companies have for years been struggling to maintain operations in Venezuela due to currency controls that make it almost impossible to obtain dollars. Price controls leave the companies unable to raise prices in step with triple-digit inflation.

The Philadelphia-based firm recently wrote off the entire value of its Venezuela facility through an accounting maneuver known as “deconsolidation” that has been widely used by foreign companies in response to Venezuela’s deteriorating economy.

“Unfortunately, in the interest of remaining globally competitive, companies such as ours sometimes have to make difficult decisions that reflect the changing needs of the marketplace,” Axalta said in an emailed statement. “Our decision to change our operations model is based on the current economic and political situation in Venezuela.”

It said it was moving to an “import model,” without specifically mentioning production.

A union leader said that operations had halted at Axalta’s plant in the central city of Valencia and that 174 employees had been laid off, adding that the statement sent to Reuters was posted on a piece of paper in Spanish at the main gate of the company.

“They caught us by surprise,” said union leader Oscar Morillo. “We worked on Friday, and on Monday they locked the doors and told us that we would receive severance payments by 7 p.m.”

A company employee who asked not to be identified said he had received the severance payment, adding that Axalta had been steadily reducing output due to the economic crisis.

The decision by Axalta, which provides paint to the automotive sector, follows the exit of General Motors Co earlier this year as a result of a protracted legal dispute with former dealers and chronic shortages of assembly parts.

President Nicolas Maduro says Venezuela is the victim of an “economic war” led by the United States, and in the past he has accused companies that shutter operations of seeking to sabotage his administration.

The Information Ministry did not immediately respond to a request for comment. (Reporting by Corina Pons; Additional reporting by Tibisay Romero; Editing by Leslie Adler)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below