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Honda to resume China car output, strike lingers

Honda to resume China car output, strike lingers
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First Published: Thu, Jun 10 2010. 05 01 PM IST
Updated: Thu, Jun 10 2010. 05 01 PM IST
Tokyo /Hong Kong: Honda Motor Co said it would resume building cars in China on Friday after a supplier of exhaust systems contained a labour dispute, but workers at another parts maker remained on strike.
But this optimism could be clouded by workers at a lock supplier for Honda in southern China’s Pearl River Delta, who plan to extend their strike into a third day on Friday.
At the plant, a unit of Honda Lock, a mass of striking workers in white overalls pressed against the factory perimeter fence, shouting demands for higher wages while watched by police who blockaded roads and prevented journalists from approaching.
Among the demands were calls for an annual wage hike of not less than 15%, improved allowances and benefits, the right to organise independent labour unions and a pledge from management to not fire anyone joining the industrial action.
“We’re definitely going to strike tomorrow,” said one of a flood of workers streaming out of the gates in the late afternoon. “Our wages are too low.”
Earlier in the day, a Honda Lock official in Japan said shipments would be unaffected for at least a day or two, with enough locks in stock. But he added that negotiations were ongoing, and a prolonged dispute could disrupt the flow of supply to Honda’s car plants.
“We’re still gathering information, and we don’t know when the negotiations will end,” Honda Lock’s Hirotoshi Sato said.
The fresh labour troubles for Honda come after the apparent settlement of two earlier strikes at auto parts suppliers.
Japan’s No.2 automaker and iPhone maker Foxconn International Holdings have been the most prominent companies hit by a growing string of disputes across China between workers resentful of income disparities and employers grappling with rising costs.
Strikes are usually stamped out quickly in China by stability-obsessed officials. But more disputes have been erupting lately, as workers in the world’s manufacturing hub are emboldened by substantial wage hikes made by the likes of Foxconn, owned by Taiwan’s Hon Hai Precision Industry Co.
Honda, which sold 17% of its cars in China last year, has idled its four local factories on and off since 24 May, since a first strike at a wholly owned transmissions maker in the southern city of Foshan.
A second strike, at a maker of exhaust pipes and other parts, also in Foshan, ended late on Wednesday, and the plant’s Japanese parent said that with production back to normal, shipments to Honda’s suspended factories would return to normal on Friday.
The truce, however, could prove to be a fragile one, with workers saying key negotiations over pay would continue.
Honda had halted production at two assembly plants, which build the Accord, Fit, Odyssey and City, on Wednesday and Thursday, and said it would resume work on Friday.
One auto analyst said he expected wage hike concessions to have limited impact on Honda’s profits because labour costs accounted for just 5-6% of its total revenue even in high-cost Japan.
“So if we assume wages in China are between one-fifth and one-third those in Japan, the cost of factory floor workers in China comes to around 2% of sales,” JPMorgan analyst Kohei Takahashi wrote in a report.
“Assuming factory wages in China were raised a uniform 30%, we estimate the impact on the China operating margin would be (a decline of) 0.6%.”
He estimated that Honda lost about 20,000 vehicles in output from the strikes, likely hitting its Chinese operating profit by about ¥12 billion ($131 million). Honda said it hoped to make up for lost production through overtime and other means.
Some executives conceded that demands for higher pay were inevitable as China’s economy gallops ahead and develops.
“We had far worse labour strife in Japan when our economy was booming decades ago,” Mitsubishi Motors Corp President Osamu Masuko told Reuters this week.
“It’s natural for China to go through this phase as its economy expands. Even so, you don’t see anyone pulling out of China -- that’s not an option because of the market’s growth.”
Honda shares ended virtually flat on Thursday, while the Nikkei average gained 1.1%.
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First Published: Thu, Jun 10 2010. 05 01 PM IST