Bloomberg News

GM, Toyota, BMW Shut Plants in South Africa as Strike Begins (2)

August 19, 2013

Carmakers including Toyota Motor Corp. (7203), Nissan Motor Co. (7201), Bayerische Motoren Werke AG (BMW) and General Motors Co. (GM:US) shut production in South Africa as about 30,000 workers began a strike to demand higher wages.

The National Union of Metalworkers of South Africa called for a walkout at plants operated by seven vehicle manufacturers across Africa’s biggest economy today after a breakdown in wage talks, according to Castro Ngobese, a spokesman for the union. “We are waiting for employers to submit a revised offer,” he said by phone.

Numsa is asking for a 14 percent annual wage increase alongside improved medical benefits and shift flexibility, the union’s National Treasurer Mphumzi Maqungo said. Employers are willing to offer 10 percent in the first year, the union’s General Secretary Irvin Jim said on Aug. 16. This compares with the South African Reserve Bank’s forecast for 5.9 percent average inflation in 2013.

The strike is disrupting output in an industry accounting for 7 percent of the country’s gross domestic product, according to the Department of Trade and Industry. A prolonged stoppage of production will impact economic growth, foreign direct investment, and South Africa’s reputation as a supplier to the world’s vehicle industry, economists and the manufacturers’ association say.

Deteriorating Production

“Loss of output can easily become a drag on gross domestic product as is evidenced by the deterioration in mining and manufacturing production,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. (NED) in Johannesburg, said by phone.

BMW, where workers have been striking since Aug. 8, is losing 345 3 Series Sedans every day and will have to re-allocate volume to other plants around the world, Guy Kilfoil, general manager, group communications and public affairs at BMW in South Africa, said in an e-mailed statement. Toyota is losing output of 729 vehicles a day, according to spokesman Leo Kok. Nissan’s daily output of about 245 units has also been disrupted by the strike.

General Motors’ South African unit has two plants in Port Elizabeth, in the Eastern Cape province, where it makes Chevrolet cars and Isuzu trucks.

“We were not able to continue with normal production in South Africa today,” Lunga Ntsendwana, product communications manager for General Motors, said in an e-mailed statement. “We have had a 20 percent attendance rate, and have re-allocated our labor to ensure we are able to continue to support dealer service activities” and delivery of new vehicles.

Radical Unions

The automotive industry receives subsidies of about 18 billion rand ($1.8 billion) a year from the South African government, Mike Schussler, chief economist at Johannesburg-based economists.co.za, said by phone, citing National Treasury data. “It’s not a small amount,” he said. “Unfortunately, they have got one of the most radical unions in the industry that the world knows.”

The strike may cost the industry as much as 700 million rand a day by reducing output by 3,000 vehicles, the National Association of Automobile Manufacturers of South Africa said on Aug. 16.

Exports of South Africa-made vehicles increased 18 percent to 147,616 units in the first six months of 2013 compared with a year earlier, according to data from Naamsa. Shipping of vehicles is forecast to reach 337,000 units this year, compared with 277,893 in 2012.

Strikes would “compromise our record as reliable supplier of vehicles to the international market,” Naamsa Director Nico Vermeulen said on Aug. 16.

To contact the reporters on this story: Kamlesh Bhuckory in Johannesburg at kbhuckory@bloomberg.net; Amogelang Mbatha in Johannesburg at ambatha@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net


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