Strike-hit South African automakers face production halt

Fri Oct 4, 2013 1:21pm EDT

* BMW says no longer considering S.Africa expansion

* Auto industry accounts for 6 pct of GDP

* Next trade figures could be "scary" -analyst

By David Dolan

JOHANNESBURG, Oct 4 (Reuters) - Automakers in South Africa could face a complete halt in production from as early as next week, industry officials said on Friday, after a strike at component manufacturers cut off the supply of parts.

The strike an industry that accounts for 6 percent of GDP is one several this year threatening to hamper growth and further dent investor confidence in Africa's largest economy.

Germany's BMW said this week it was no longer considering expanding production in South Africa because of the labour unrest.

While strikes this year have been shorter and more peaceful than in 2012 - when scores of people were killed including 34 miners in a single day - investors remain worried about the state of labour relations.

"From next week we start running into issues where we will probably not produce at all," said BMW spokesman Guy Kilfoil.

BMW is producing as few as 85 cars a day, instead of the usual 350, because of the lack of parts, Kilfoil said. Some of those are being built without parts such as bumpers, which will have to be added later.

The company had been considering producing a second model at its plant in Rosslyn, near Pretoria, where it builds the 3 Series sedan, Kilfoil said. Those plans are now off the table because of the labour unrest, he said.

A four-week strike by more than 30,000 workers at major auto makers including BMW, Ford, Nissan and General Motors ended last month and cost the industry $2 billion in lost output.

But as workers on the assembly lines came back to work, those at suppliers walked out and the strike is now heading into its fifth week.

An official for Nissan said of sales of locally produced light commercial vehicles had been "severely undermined" by the labour unrest, adding it no longer had supply of some models in showrooms.

RISK/REWARD

"BMW has clearly had enough of the labour situation and the risk/reward of further investment simply doesn't make sense for them," said Peter Attard Montalto, an emerging markets analyst at Nomura International in London.

"There are many other companies thinking the same thing because of labour issues," he said, adding the strike will likely mean a "scary" number for September trade figures due at the end of this month.

South Africa's trade shortfall unexpectedly widened to 19.05 billion rand ($1.9 billion) in August, the biggest gap in seven months.

The rand has also suffered, with the currency losing nearly 19 percent this year.

Former central bank governor Tito Mboweni, still a senior member of the ruling African National Congress (ANC), acknowledged on Thursday the difficult state of negotiations between companies and unions.

"The recent history of labour relations in South Africa has not been a proud one," he told an Africa investment forum in Dublin.

"Poor communication, a lack of respect and good faith, destructive behaviour and an unwillingness to compromise have been observed far too often."

Jobs remain a sensitive issue in South Africa, where unemployment officially stands at 25 percent and the ANC faces elections next year.

Workers at Anglo American Platinum, the world's top platinum producer, have been on strike since last Friday in protest to planned job cuts the company says it needs to return its operations to profit.

Amplats has said it is losing an average of 3,100 ounces of production a day from the strike. Gold producers and unions agreed to wage hikes of up to 8 percent last month, ending a three-day strike.

Those settlements are expected to amount to 1.5 billion rand in extra costs for companies.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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