Toyota says China plant output to remain suspended

TOKYO/HONG KONG Wed Jun 23, 2010 1:00am EDT

TOKYO/HONG KONG (Reuters) - Honda Motor Co (7267.T) halted production at a car making factory in southern China on Wednesday, making it the second car maker after Toyota Motor Corp (7203.T) to turn off assembly lines because of a strike at a supplier owned by Japan's Denso Corp (6902.T).

A Honda spokesman said it was not certain when production at the factory, one of two plants at its joint venture Guangqi Honda, would resume. The halted plant has an annual production capacity of 240,000 units, and makes the Accord and Fit, among other models.

Toyota said earlier that production at a key Chinese auto assembly plant will remain halted for at least the day shift on Wednesday because of the same strike.

Work at the Toyota factory, which has an annual capacity of 360,000 units and makes models such as the Camry and Yaris, has been suspended since Tuesday morning because of the strike at Denso (Guangzhou Nansha) Co Ltd.

The Denso plant, located in China's booming Guangdong province, supplies fuel injection equipment and other products to clients such as Toyota and Honda Motor Co (7267.T) and has stopped shipping parts since Monday.

Toyota spokesman Paul Nolasco said production would be halted at its assembly plant for at least the day shift, which finishes at 4:45 p.m. local time (0845 GMT). He said no decision had yet been made on the night shift.

The strike at the Denso plant is the latest in a string of walkouts that has paralyzed several factories across China.

In recent weeks, strikes have broken out at a supplier of locks to Honda, a Toyota Gosei plant which makes parts for Toyota, and Chongqing Brewery Co Ltd., among others. All have since been resolved.

DENSO STRIKE TO CONTINUE

A Denso worker, reached by telephone, said employees and management had not yet reached an agreement.

"We'll continue to strike today as the management failed to come up with a wage increase offer," said the worker, who declined to give his name for fear of retribution.

Denso spokeswoman Yoko Suga confirmed that no agreement had yet been reached with workers, who have been negotiating for higher wages and better benefits.

Employees are asking that wages rise from between 1,100 and 1,300 yuan ($161-191) per month to between 1,800 and 1,900 yuan, according to the Denso employee.

Foreign car makers have been a particular target of strikers in recent weeks, with much of the labor action apparently aimed at replicating the success of earlier work stoppages at auto parts suppliers.

"We were inspired by the Honda Nanhai strike," said the Denso worker, referring to a strike earlier this month at a Honda parts supplier, which resulted in a 24 percent wage increase.

"Our strike will have a greater impact since we supply to more car brands, including Toyota, Honda, GM GM.UL, Jiangxi Suzuki and Hyundai (005380.KS)."

Even automakers who have not faced labor disputes may find themselves forced to lift wages, said analysts.

"If they don't want to lose the China market, (car makers) will have to raise salaries, especially at parts suppliers," said Lin Huaibin, an analyst with IHS Global Insight. "They don't really have a choice as the strike will keep spreading."

Honda shares fell 2.3 percent on Wednesday and have dropped more than 10 percent since the first strike at its supplier started at around mid-May.

Shares of Toyota lost nearly 9 percent in the same period, compared with a drop of 5 percent for the benchmark Nikkei average. The company's shares were down 1.8 percent on Wednesday morning, in line with the Nikkei .N225.

(Additional reporting by Alison Leung, Fang Yan, and Taiga Uranaka; Editing by Chris Lewis and Valerie Lee)

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