General Motors Ecuador factory shuts down amid market pressures

General Motors (GM) plans on shutting down its manufacturing plant in Ecuador this Friday, effectively pulling out of operations in the country. The step has been made as GM has recently experienced growth in competition from local auto makers and after the company’s statement made in April when GM decided to cease production not only in Ecuador but also in its neighboring state – Colombia.

General Motors OBB plant in Quito has been the biggest car producer in Ecuador that was responsible for 51% of its automobile production. This is expected to come with a major blow to the local market as well as the 320 workers who have been working at the facility.

It creates apprehensions over displacement of workforce and the myriad impact on local economies. In the interview with Antonio Oramas, the nine-member welding team leader who has been working at the plant since 2004, he showed mixed feelings as he was preparing to weld his last truck. “I have mixed feelings — I am welding my last truck for General Motors in Ecuador,” Oramas said. “It will impact us in many ways. Not everyone of us will be privileged to get another job.”

The unemployment rate in Ecuador was at 4.1% in the first quarter of the year per official data, the competition for jobs remains steep for people who lost their jobs due to the shutting down of the factory. However General Motors unveiled plans to stop production in Ecuador but will still supply cars into the market either through imports or other mechanisms. The current decision is considered within the broader context of strategic changes due to the changing market environment and competition.

The following case will bring to light the closure of Quito plant, with reference to the Ecuadorian automotive industry and how multinational firms struggle to deal with local idiosyncrasies coupled with other macroeconomic factors.