Strike brings South African auto sector to near standstill

CAPE TOWN Mon Aug 19, 2013 6:33am EDT

People walk near Toyota Motor Corp's Durban car factory, which has been forced to shut down for four days due to an illegal pay strike by employees, in Durban October 4, 2012, the first sign of wildcat mine stoppages spreading into other parts of Africa's biggest economy. REUTERS/Rogan Ward

People walk near Toyota Motor Corp's Durban car factory, which has been forced to shut down for four days due to an illegal pay strike by employees, in Durban October 4, 2012, the first sign of wildcat mine stoppages spreading into other parts of Africa's biggest economy.

Credit: Reuters/Rogan Ward

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CAPE TOWN (Reuters) - South Africa's auto manufacturing industry came to a near standstill on Monday when about 30,000 workers downed tools, adding to the labor woes of the continent's largest economy which has been hit by violent unrest at its mines.

The stoppage would cost the industry about 600 million rand ($60 million) a day in lost production, the National Association Automobile Manufacturers of South Africa (NAAMSA) said.

"The strike affects the entire value chain of the industry," NAAMSA director Nico Vermeulen said.

Five of the seven companies operating in the South African auto sector, including Toyota (7203.T), Ford (F.N) and General Motors (GM.N), said production had been halted or affected.

Underpinned by government incentives, the industry contributes at least 6 percent to gross domestic product and accounts for 12 percent of exports.

A fresh round of labor unrest will be a political headache for President Jacob Zuma and the ruling African National Congress (ANC) ahead of elections next year.

The strike was called last week by the National Union of Metalworkers of South Africa (NUMSA), its largest manufacturing union, which wants pay hikes of 20 percent for its members, compared with inflation at 5.5 percent. Companies have offered 6 percent.

The central bank has warned about the inflationary impact of high wage settlements on consumer prices. But workers are stretched financially and often have several dependents, with the unemployment rate officially at 25 percent, and at 40 percent, according to most analysts.

Strikes also loom in the mining sector with unions seeking pay rises of up to 150 percent, which companies say they can ill afford as metal prices slump.

Mining strikes over the last 18 months have killed more than 60 people, slowed economic growth, hit the rand currency and led to sovereign credit downgrades.

LABOUR HEADACHE FOR ZUMA

Zuma and the ANC have faced heavy criticism for their handling of last year's wave of wildcat strikes in the mines, which also dented growth and alarmed foreign investors.

Elias Kubeka, national motor sector coordinator for NUMSA, said the auto industry strike was "very well supported and all of the factories, 100 percent, are shut down". Meetings between the two sides were scheduled for later on Monday.

Toyota said 80 percent of its 8,000-strong South African workforce had not turned up for work.

Guy Kilfoil, a spokesman for BMW (BMWG.DE) in South Africa, said the strike was costing it 345 cars a day.

"We work 24 hours, seven days a week. There is no production and there is no plan to make it up," he said.

Wages in the auto sector range from about $850 a month for basic workers to $1,800 a month for qualified technicians.

In the United States, according to the U.S. Bureau of Labor Statistics, the annual average hourly wage in 2012 in vehicle manufacturing was $28.08. Assuming a 40-hour week, this would be close to $4,500 a month.

But worker productivity in South Africa is constrained by low skills and training, industry experts say.

(Writing by Ed Stoddard; Editing by Louise Ireland and Pascal Fletcher)

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