Exports of vehicles from carmakers based in South Africa have been halted since last Wednesday because of the ongoing strike by the National Union of Metalworkers of SA (NUMSA), with no clear sign of a resolution after a week that is estimated to have cost the industry R12.5m a day ($1.8m).
Production at South Africa’s car plants, which combined produce more than 2,100 vehicles a day, has been stopped because of the strike. By the end of Wednesday this week the deficit in production is expected to be more than 12,500 vehicles. Half of those vehicles are built for export and the shutdown has had a serious impact on the intensive export strategies that many are pursuing, as well as threatening business for finished vehicle carriers should the dispute continue.
While stock levels of vehicles remain reasonably high the problem is being handled by road hauliers such as VDS. Ian Lourens, CEO of parent company OneLogix, told Automotive Logistics News that it was coping but added that, “depending on how long the strike lasts, there could well be a problem down the road, if stocks get depleted and we have to play catch up. We think that we are reasonably well positioned to cope with this situation, should it arise.”
Lourens said that vessels were still docking at South Africa’s vehicle handling ports but Wallenius Wilhelmsen Logistics said this morning that the strike is having an impact on its export operations and inland distribution.
The largest vehicle exports to overseas markets come from Toyota SA, Volkswagen SA and BMW SA.
All three are among those carmakers affected by the strike with BMW having closed its Rosslyn factory outside Pretoria, with a loss of production amounting to around 250 cars a day. Similarly Toyota has been forced to stop production at its Durban plant, which produces the Corolla, Hiace, Fortuner and Hilux, losing 520 units a day.
GM, which doesn’t export vehicles from the country yet but does export parts, said it has lost production of 153 vehicles a day since the beginning of the strike.
“While there is stock to service demand in the immediate short term, any protracted stoppage will have a significant impact on ensuring sufficient stock going forward,” said GMSA spokesperson Denise van Huyssteen. “Both Chevrolet Corsa Utility and Isuzu KB will be impacted, whereas the balance of our product offerings, namely Chevrolet and Opel passenger, remain unaffected.”
Negotiations resumed at 10 o’clock this morning between the NUMSA, which represents 31,000 workers, and the Automobile Manufacturers Employers’ Organisation (AMEO), which has rejected demands for a 15% wage increase over a one-year agreement. AMEO said this would almost double the annual bonus and a mean a 50% increase in sick leave payment, with the total cost implications of the NUMSA demands in excess of 30%.
The employers’ represented by the union are instead offering a 7% wage increase for 2010, based on a three-year agreement, with increases in subsequent years linked to inflation. This has led to protests on the streets in Pretoria this week.
South Africa is the largest car producer on the African continent and manufactures around 400,000 units per year, across 60 brands and more than 1,100 models. The industry accounts for the biggest manufacturing export activity in the country, accounting for about 6% of the nation’s GDP.
Volkswagen SA is just one carmaker pursuing an intensive export strategy from its plant in Uitenhage, which is aimed at increasing export volumes of the new Polo by 150% from 30,000 vehicles in 2009 to more than 75,000 vehicles in 2010, a figure now under threat from the current action.
The latest strike follows one in May this year that ran for 18 days when Transnet’s South African logistics network was brought to a standstill by union staff demanding a similar pay increase. The South African Transport and Allied Workers Union (Satawu) and the United Transport and Allied Trade Union (Utatu), which between them represent 85% of Transnet’s 54,000 staff, protested their demands for a 15% pay increase, above the 11% offered by Transnet. In the end workers accepted an 11% pay increase with a one-off additional 1% of annual salary added in June. That strike was estimated to have cost the South African economy R7bn and caused headaches for those depending on vehicle and parts exports.
The consequences of that strike have left carmakers more vulnerable to the impact of the latest action as they attempt to recover inventory.
“At this stage component exports have not been adversely impacted,” said GMSA’s van Huyssteen. “However, we are concerned that the inventory levels are still recovering from the recent extended Transnet strike and that labour disputes at this critical stage in restoring our inventories could jeopardise vehicle production at our offshore customer plants, which will longer term be to the detriment of future contracts/supply from South Africa. The Transnet strike resulted in critical planning of a significant amount of costly outbound airfreight, as will labour related strikes within the local supply chain.”
The strike action in South Africa mirrors that taken by automotive workers in China recently. However, total costs for South Africa’s automotive industry are about 40% costlier than those in China.