UPDATE 2-South Africa's NUMSA union plans auto sector strike

Wed Aug 14, 2013 9:34am EDT

* Car industry contributes about 6 pct of GDP

* Toyota, Ford, GM, Nissan and BMW have plants in country

* Strike could dent investor sentiment

By Wendell Roelf

CAPE TOWN, Aug 14 (Reuters) - South Africa's biggest union for manufacturing plans to launch an open-ended nationwide strike on Monday in the country's key auto sector in a dispute over pay affecting over 30,000 assembly line workers.

The strike in the car industry, which contributes at least 6 percent to the country's GDP and 12 percent of its total exports, could compound the woes of Africa's largest economy, reeling from strikes in mining that have slowed growth.

"The national executive committee will formalise the strike notice tomorrow for the start of the national strike on Monday," Alex Mashilo, chief negotiator in the auto sector for the National Union of Metalworkers of South Africa (NUMSA), told Reuters on Wednesday.

Mashilo said the strike would continue until a wage settlement was reached. Labour has revised its initial demand for a 20 percent increase to 14 percent, well above the central bank's projected inflation rate for the year of 5.9 percent.

Major carmakers in South Africa, including Toyota, Ford, General Motors and Nissan, were only prepared to offer 6 percent during negotiations to replace a three-year wage deal ending on June 30, Mashilo added.

Toyota, which reported strong third quarter sales growth, is also the market leader at about 25 percent of all vehicle exports from South Africa, shipping 6,668 units in July.

BMW's South African operations have already been hit by a strike that started last week when 2,000 workers walked off the job over pay. The company has made up for lost production by rolling off more cars at its other factories.

REPUTATIONAL DAMAGE

A prolonged and massive auto strike threatens to erode some of the recent gains made by the industry as it tries to match a pre-recession historic export peak of 284,000 units in 2008.

"The impact would be extensively negative and the biggest issue is a loss of reputation that takes a long time to recover," said Thapelo Molapo, chairman of the Automobile Manufacturers Employers Organisation which represents carmakers.

Besides the loss of production and revenue, a strike similar to the last one in 2010, which lasted eight days, could send ripples through financial markets.

"More strike action will keep negative sentiment towards South Africa elevated and we can see that impact on the rand currency underperforming and investment flows slowing," said Gareth Brickman, market analyst at ETM Analytics.

South Africa's mining sector is still trying to recover from a deadly labour dispute at Lonmin's Marikana platinum mine, where 34 striking workers were shot dead by police almost exactly a year ago, in the deadliest security incident since apartheid ended in 1994.

The strike started a wave of wildcat action that slowed production at many of the country's major platinum and gold mines.

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