Is Numsa pushing some unwanted buttons?

Below is a selection of headlines from news reports that I have seen in July. These might have been taken in isolation but the contrasting messages give us a reality check when put together. They come soon after the Australian automotive industry was dealt a huge blow with the automotive OEMs deciding to pull out of Australia by 2017. Reading between the lines it is quite evident that the OEMs assessed the situation and costs, led by demanding Unions, which forced them to take this drastic decision and re-shore or look elsewhere. We must not forget that it was only in August 2013 that 30 000 South African auto workers held a four-week strike. Numsa then called out members at automotive components suppliers, thereby denying assemblers the parts they needed to build vehicles. The dual strikes shut down the industry for seven weeks. BMW immediately put its South African expansion plans on hold.

International headlines
GM to invest $740 million in new Argentina factory
VW plans $250 million investment for India
BMW Group to build plant in Mexico
Jaguar Land Rover plans China engine plant
PSA to start output in Nigeria this year
BMW will raise China capacity to 400 000 vehicles

South African headlines
GM shuts assembly plant as strike hampers component supply
Nissan latest automaker to suspend South Africa production amid strike
Strike-weary Ford hopes for quick resolution to labour situation
Toyota, Ford halt output in South Africa as strike spreads
Auto manufacturers start to feel Numsa strike impact
71% year on year rise in May copper theft

So are foreign automotive investors on the point of losing patience with strike-prone South Africa? Or will militant trade unionists be proved right in their gamble that multinational motor companies are too deeply embedded in SA to walk away? These are the questions asked by David Furlonger for his cover story in a recent issue of Financial Mail.

Furlonger continues: “Though there appears to be no question at this stage of disinvestment by any of SA’s seven full-scale vehicle manufacturers — BMW, Ford, General Motors, Mercedes-Benz, Nissan, Toyota and Volkswagen — there is a sense that they may reconsider the scope of their presence here. BMW and Datsun, Nissan’s reinvented entry-level brand, admit that plans to build new cars in SA were put on hold because of the uncertain labour environment.”

“The cars would have been mainly for export but the companies say they can’t risk an unreliable workforce. Last month, Datsun’s global head, Vincent Cobee, expressed regret at having to bypass SA for the Go car, which is designed for emerging markets and will go on sale in SA in a few weeks. The first generation of the car will be imported from India.”

The impact of this strike could have far reaching implications and unions must accept that actions always have consequences. The South African and sub-Saharan Africa markets may have good long-term prospects but they are not so important to the OEMs, in world terms, that the usual rules of economics don’t apply.