BMW cuts production as strike persists

BMW SA will cut production by a third from Wednesday as the week-long strike by the National Union of Metalworkers of SA (Numsa) affects its Rosslyn plant in Pretoria.

The maker of the 3 Series sedan is the second vehicle manufacturer to take steps to manage the strike’s disruptions to its component supply chains. General Motors SA (GMSA) shut down its production lines last week.

BMW said on Monday that it would resume limited operations from Tuesday after closing for a week for factory maintenance. The maintenance was brought forward by several weeks in the hope that the strike would be over by the time the plant reopened.

BMW spokesman Guy Kilfoil said cars would be built on a two-shift rotation for the rest of this week, instead of three shifts. If there was no sign of a settlement by Friday, BMW would consider whether to open next week. Some other motor manufacturers were considering a similar deadline.

The Numsa strike is not at the vehicle plants, but at steel and engineering companies that supply many of their components. As these stop producing, motor companies will run out of parts to use in their assembly lines.

Most car manufacturers stockpiled parts in hopes they could ride out a short strike, but if it goes into a third week several have said that they may halt production.

Like other companies, BMW would decide whether to continue production "on a day-to-day basis", Kilfoil said.

"We knew some time ago that the potential for disruption was very high and that we might be able to continue working for only a limited time," said Volkswagen SA MD David Powels. "We are taking every day as it comes.

"We should be okay for a while, but you can only build the car if you have 100% of the parts," said Powels, whose company builds the Polo and Vivo in Uitenhage.

Parent companies fear an extended strike could once again disrupt South Africa’s vehicle exports.

Last year, successive strikes at assembly plants and their suppliers cost the local motor industry billions of rand in lost revenue, and raised more questions overseas about the country’s reliability as an export source.

Mercedes-Benz SA CEO Arno van der Merwe said parent company Daimler understood South Africa’s labour dynamics and the strike "is not a risk to our investment".

Powels suggested it would at least make foreign companies consider the scale of their South African operations.

"Overseas investors might believe we are not serious about wanting to grow our country and economy," he said.

Talks aimed at ending the wage strike of about 220,000 metal workers will continue on Friday, with a possible meeting between Numsa and the employer bodies, Numsa sector bargaining co-ordinator Stephen Nhlapo said.

Employer bodies described last week’s talks with Numsa as "failed" and said the parties were "far apart".

The Steel and Engineering Industries Federation of SA (Seifsa), the largest federation of employers, tabled a three-year deal of between 7% and 10%, while the National Employers Association of SA (Neasa) continues to maintain its members cannot pay more than 8%.

Seifsa met labour minister Mildred Oliphant again on Monday in the hope that the state could offer a solution.

International credit rating agency Moody’s warned last week that the Numsa strike, coming so soon after the end of the five-month wage strike in the platinum sector, was "negative" for South Africa’s credit rating. Fellow ratings agency Standard & Poor’s has already cut South Africa’s rating to one level above junk status. The cut drew a sharp response from the Treasury, which said it was "premature" given the work ahead of the African National Congress in its fifth term, and its commitment to implementing the National Development Plan.

Neasa and Seifsa will meet on Tuesday to try to iron out the differences over wage offers, Neasa CEO Gerhard Papenfus said yesterday, adding that Neasa members could not afford the deal tabled by Seifsa.

Seifsa last week dropped a proposal to halve minimum wages for employees at new entrants to the industry, while Neasa upheld it, citing the hundreds of thousands of jobs lost over the past decade.

- Business Day Live