October 6, 2013 3:53 pm

South African auto employees end strike

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A worker walks near a row of cars at Nissan's manufacturing plant in Rosslyn, outside Pretoria©Reuters

Union leaders said on Sunday that they were ending a four-week strike in South Africa’s auto industry that has severely disrupted production at manufacturers including Toyota, BMW and Ford.

Irvin Jim, general secretary of the National Union of Metalworkers of South Africa, said that the union had accepted a three-year deal, which includes a salary increase of 10 per cent in the first year and 8 per cent after that. Workers would return to work on Monday, he added.

The four-week strike by employees in the component sector broke out immediately after three weeks of industrial unrest by assembly workers, triggering warnings that the combined action jeopardised future investment.

Officials said that it was the longest period of industrial action to hit the country’s auto sector, costing thousands of vehicles in lost production and billions of rand in revenue. But more significant is the damage the strikes have heaped on the image of South Africa as an investment destination, adding to concerns over the fragile state of labour relations in Africa’s largest economy, industry officials say.

BMW, whose South African operations account for about 25 per cent of its global production of its 3-series, has already announced that its South Africa business is no longer in the running to manufacture a new model.

The group made the decision even before the second strike. Guy Kilfoil, a BMW spokesman, said: “Basically they have said, ‘Listen it would not be responsible for us to add more responsibility to Rosslyn [the South African plant] when you can’t meet your current requirements’.

“It means even if there was intent to expand, it won’t go ahead simply because of the unreliable nature of supply in South Africa.”

The strikes have cost BMW’s South Africa operations the production of 13,000 vehicles. It has been ramping up production with a target of about 85,000 vehicles this year, compared with 48,000 in 2012.

But Mr Jim defended the strike action. “[The vehicle manufacturers] who claim the strike is basically troubling the economy, is threatening their investment, are the very same guys who squeeze the common employee,” he said. “We reject and refute that fact that we could be blamed for any form of investment that could have gone sour.”

Other car manufacturers have also been expanding in South Africa as the industry – which is supported by government incentives – has been one of the few bright spots in the struggling manufacturing sector.

South Africa exported 278,000 vehicles last year, to destinations including Europe, the US and Africa, and there have been forecasts that production could reach record levels this year, with exports rising to 325,000 vehicles.

As exports have risen, the industry has become more integral to global supply networks, meaning the ramifications of the strike are more widely felt by producers.

“When you are in the global supply chain from the standpoint of sales, we are affecting more than just South Africa . . . it becomes visible in the boardroom and . . . it hurts our credibility and our reputation,” says Jeff Nemeth, chief executive of Ford in South Africa. “You do that enough times and people are going to say so why are we sourcing trucks from South Africa?”

He says the situation has not yet reached that point, and cites the positives of investing in South Africa relative to other developing markets, including its strong and well-regulated financial system and developed infrastructure.

But Mr Nemeth warns that foreign investors want to see that South Africa is moving in the right direction.

Investment sentiment towards the country was severely shaken by a wave of violent wildcat strikes in the mining sector. There have been concerns that the militancy displayed by miners would spread to other sectors in the country.

Leo Kok, spokesman for Toyota, says: “Strikes aren’t unique to South Africa . . . but what has caused severe reputational damage to us is the duration and uncertainty of the strike.”

Toyota has the capacity in South Africa to produce 220,000 units and will make an estimated 160,000 units this year. It plans to increase production and is set to begin manufacturing a new model of its Corolla in South Africa in the first quarter of 2014.

Mr Kok declined to discuss any potential effect on Toyota’s plans in the country. But he said: “We are concerned that there will be long-term impact, especially as we are ramping up to increase our local production.”

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