Carmakers keeping calm and carrying on

Great DivideIndustry leader talks of common ground as union boss lashes out at 'dishonesty' and 'selfishness'

NATIONAL Union of Metalworkers of SA boss Irvin Jim has had some incredibly rude things to say about South African automobile manufacturers, but National Association of Automobile Manufacturers boss Dr Johan van Zyl says more things unite than divide them.

The two bosses met on Monday in a bid to prevent the next round of wage talks in 2016 degenerating into a repeat of the violence and strike action that paralysed the car industry earlier this year.

"The meeting was to look at the future of our industry and to find better ways of conducting collective bargaining," says Van Zyl, 56, who is also the CEO of Toyota SA. It took place a few days after Jim had said that South African auto companies were "dishonest, selfish and milking the country".

Says Van Zyl with unintended humour: "There are many commonalities between us."

For him it is no laughing matter. If union leaders and industry bosses don't find a way of creating a new kind of relationship, he says, then auto manufacturing in South Africa will not be sustainable. It cannot survive many more repeats of the labour unrest which rocked it last year and again this year.

"It is impossible that we can continue like that. If we do, then eventually we will close the industry down. We have to go all out to find a new way."

How do you even begin to find a new way with someone who believes you're a liar and a thief? "There is more we agree on than disagree on," says Van Zyl, seemingly unperturbed by Jim's outburst. "We agree that the motor industry is very important for the South African economy, and also a very important employer." That's true enough. It contributes 7% of GDP and employs 36000 people.

Every time Numsa brings production to a halt, the country's GDP takes a knock and employees, Numsa's members, lose income and risk losing jobs. "When you strike, there are no winners. Everybody loses."

This is not a viewpoint strongly articulated by Jim or Numsa.

"They agree on the need to grow this industry, not shrink it," says Van Zyl. He says there is also agreement on the need to increase local content and create more jobs. This is interesting, because shortly before their meeting, Jim was accusing the auto industry of reneging on their obligation to do these things.

Auto manufacturers were recipients of massive government incentives bankrolled by the taxpayer, but they were not honouring their side of the deal, said Jim. They had completely disregarded the fact that they should be championing localisation and the creation of jobs.

"Of course we'd like to boost local content," says Van Zyl. "It is very much in the interests of the industry to do so. But the government needs to get its ducks in a row first.

"Our real competitive advantage lies in our raw materials. If we can localise our materials we can reduce our costs, be more competitive and grow."

The industry is importing plastic and aluminium components at great cost, even though they can source both locally if there was beneficiation of the raw materials that go into these products, he says. "We need to localise raw materials so we can localise components."

The industry is not standing still. "We're looking at local supply development and local component development; how to bring new technologies, which we can localise, and how to improve efficiencies of local suppliers."

Is Jim, who accuses local auto companies of being "dishonest", himself being disingenuous when he attacks the industry for not championing localisation and skills development? Or is he just badly out of touch?

"We know what we are doing and our record speaks for itself," says Van Zyl. But government policies need to be properly aligned.

"If we can get our beneficiation policy aligned with our manufacturing policy, we can create a winning formula. There needs to be strong alignment between the policy of industrialisation and the policy of beneficiation."

One lies on the minerals side and one on the industrial, Department of Trade and Industry, side.

"We need to align these so we have a value chain approach."

Key to the success of localisation is pricing, ensuring that the local industry can source local raw materials more cheaply than its competitors in the rest of the world.

Will cheap raw materials be enough if energy costs go through the roof?

"Compared with other parts of the world they're still reasonable. That is not our biggest issue."

A more immediate challenge is the high cost of logistics. "We need to improve our port and rail efficiencies. This is having a big impact on us."

Although at least four auto component suppliers have left the country recently because of labour costs and instability, he says high wages are not as much of a challenge to manufacturers as low productivity.

Local auto manufacturers are unlikely to follow their suppliers out of the country, he says. For now.

"It is almost impossible to relocate to another African country at this stage because there is no supply base. Infrastructure, size of market, logistics - all need to be taken into account and all of these things exist in South Africa."

In spite of the serious problems, multinationals still choose South Africa as a manufacturing location because it is ideally situated to serve sub-Saharan Africa and African and other export markets.

"But if we do not find stability, this will not be enough.

"Strikes may not be unique to South Africa, but strikes that last nine weeks are.

"I have never heard of an entire industry anywhere else in the world that gets taken out for such a long time."