Bloomberg News

Toyota, Ford Halt Production as South Africa Strike Deepens

July 14, 2014

Toyota Motor Corp. (7203) and Ford Motor Co. (F:US) are stopping production at South African plants as a strike in the manufacturing industry stems the supply of components.

Toyota, the biggest carmaker by exports in Africa’s second-biggest economy, will halt production of the Corolla, Hilux and Fortuner models at its Durban plant starting tomorrow, Mary Willemse, spokeswoman for the Japanese company in South Africa, said today by phone. The shutdown “is due to the ongoing strike in the metals industry, cutting supply of car components for the models,” she said.

Ford halted output at its Silverton plant outside Pretoria today due to the metalworkers strike, spokeswoman Alisea Chetty said by phone. Bayerische Motoren Werke AG is operating on two production shifts instead of three, according to spokesman Guy Kilfoil. General Motors Co.’s Port Elizabeth plant hasn’t operated since July 3.

The National Union of Metalworkers of South Africa is intensifying a strike after rejecting the latest offer from employers. About 220,000 workers have downed tools since July 1, affecting more than 12,000 companies. The walkout, the biggest organized by Numsa, follows a five month stoppage in the platinum industry that caused the economy to contract in the first quarter.

Protecting Exports

The value of exports from the automotive industry in South Africa rose 8.2 percent to 103 billion rand ($9.6 billion) in 2013, according to the National Association of Automobile Manufacturers of South Africa. Passenger cars and light commercial vehicles were shipped to 87 destinations, with Germany and the U.S the biggest markets.

Carmakers “are trying to protect the exports because they don’t want to have to cancel their export contracts, so that is why they are slowing down production,” Gina Schoeman, an economist at Citigroup Inc. said by phone. “They are running on a very fine line now.”

Volkswagen AG, which has operations in Uitenhage, in the Eastern Cape province, is assessing the situation on a day-to-day basis, according to Matt Gennrich, a spokesman for the group’s South Africa unit. The carmaker produces two generations of the Polo in the country.

“We are running normal production since the beginning of the strike,” Gennrich said by phone. “We are obviously concerned by the strike and would like it to be resolved as quickly as possible.”

Production is still going ahead at Mercedes-Benz South Africa’s plant in East London although “supply lines are becoming critical,” the company said in an e-mailed response to questions.

Confidence Low

Numsa is holding talks today with the Steel and Engineering Industries Federation of Southern Africa as the two parties try to resolve differences regarding the duration of a wage agreement, union industry coordinator Stephen Nhlapo said by phone.

Seifsa, as the employers’ lobby is known, is seeking a three-year deal while Numsa is asking for a 10 percent pay increase for one year to end the strike. A three-year agreement would be possible only if the employers accept 10 percent for each year, according to the union.

“Business confidence continues to remain low and negative because we cannot solve any of these problems,” Citigroup’s Schoeman said. “We are not a great investment destination as a result of this.”

To contact the reporters on this story: Kamlesh Bhuckory in Johannesburg at kbhuckory@bloomberg.net; Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net; Nasreen Seria at nseria@bloomberg.net John Bowker, Ana Monteiro


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