Venezuela to seize assets of O-I unit
10/26/2010CARACAS — Owens-Illinois Inc. said Tuesday that manufacturing operations are continuing as planned at its two Venezuelan plants after Venezuelan President Hugo Chavez on Monday ordered the expropriation of the Perrysburg-based glass maker's unit in the South American country.
Company spokesman Stephanie Johnston said O-I has 1,000 employees at the plants, located in Los Guayos and Valera, which are in northwest Venezuela about 100 and 300 miles from Caracas, respectively.
Venezuelan military troops have been placed at the Los Guayos facility and also are expected to arrive at the second O-I plant in Valera.
The two facilities, which have been open more than 50 years, make food jars and beverage bottles. O-I's Venezuelan operations represent less than 5 percent of the company's global operating profit.
Ms. Johnston said Mr. Chavez's announcement to expropriate the company, which was made on a talk show late Monday night, was "a surprise" for O-I executives. The company, she said, is prepared to work with the Venezuelan government to better understand the government's intentions.
The leftist leader criticized the company's practices in the country, saying it had been “taking away the money of Venezuelans.”
“Expropriate it … a company of North American capital that has been here for years exploiting the workers, destroying the environment,” he said.
Mr. Chavez did not detail his complaints about the Fortune 500 company any further.
There was no immediate reaction from the company.
Owens-Illinois also has operations throughout Latin America in Colombia, Brazil, Peru, Ecuador, and the Caribbean, focusing on the manufacture of glass containers.
It was unclear how the government would handle compensation for the company's assets in Venezuela.
Mr. Chavez has nationalized or expropriated a wide range of companies, including cement makers, retail stores, and steel mills, while seeking to lead Venezuela toward a socialist system.
Critics say his successes at reducing the number of poor families stem from high oil prices, not his socialist policies.
He said in his speech that more expropriations are planned.
“There's another list around here,” Mr. Chavez said, but added that he would save additional announcements for later.
The company announced last month that it had purchased Brazil's third-largest glassmaker for $603 million in cash as part of a plan to expand in emerging markets.
“If we really want to keep momentum and growth, we've got to go into the emerging and developing markets,” Chief Executive Officer Al Stroucken said at the time of the announcement. Growth in emerging markets is key for the company to meet its sales goal of $9.5 billion in 2012, up from $7.1 billion last year, Mr. Stroucken said.
The purchase added to expansions this year in China, Malaysia, Vietnam, and Argentina.
In reporting second-quarter profits in late July, the company, the Toledo area's largest, said a decline in revenues stemmed from unfavorable values of foreign currency, including a weaker Euro and a devalued exchange rate from its operations in Venezuela.
The $7.1 billion company, which moved from downtown Toledo to Perrysburg in 2006, was incorporated in Toledo in 1907 as the Owens Bottle Machine Corp.
It now makes bottles and jars in Asia, Europe, and the Americas and produces about half the glass bottles manufactured worldwide.