GM Suspends Production at South Africa Assembly Plant


By Devon Maylie

JOHANNESBURG-U.S. auto maker General Motors Co. ( GM ) is the latest business to be hit by debilitating labor unrest in South Africa.

The company said Friday it stopped production at its main assembly plant on the eastern coast of South Africa as a strike that started this week cut off key auto-part supplies.

On Tuesday, around 220,000 members of the National Union of Metalworkers of South Africa, the country's biggest union, went on a strike at companies across the country to demand a 12% to 15% wage increase. The latest round of talks broke down Thursday evening after the union rejected a revised offer of 10% from the negotiating body that represents the companies, the Steel and Engineering Industries Federation of Southern Africa.

General Motors said some suppliers of important car components weren't producing due to the strike and because of that the company suspended work at its Port Elisabeth plant.

The metal and engineering strike comes soon after 70,000 platinum mine workers ended a five-month-long strike that slowed economic growth in the first few months of the year and cost companies more than $2 billion in lost revenue. On Thursday, Moody's Investor Services said another strike of even larger scale--the latest strike has stopped production at nearly a third of the country's manufacturing plants--will only hurt South Africa's economy further and it is credit- negative.

"The ongoing strike activity leaves South Africa unable to take advantage of the recent pickup in growth among its major trading partners, consigning it to a third consecutive year of sub-par growth," Moody's said.

It is also another big blow to auto makers. Last year vehicle output plunged after a seven-week strike by the same NUMSA union. Car manufacturers are a key driver of growth for South Africa's economy, accounting for about 7% of its economic output. During last year's strike, carmakers lost around $60 million a day.

"The ongoing labour disruptions are harming the South African economy and are affecting the country's image around the globe," General Motors said in a statement.

While General Motors said it stopped production at its main plant, other carmakers such as Toyota Motor Corp. and BMW AG said they had enough stockpile of parts such as tires and axels to produce for the next few weeks. But if the strike runs longer they said production could be interrupted too.

"It is evident to us that NUMSA is advancing a political agenda against the ruling party...and that it has now chosen to bludgeon business into submission," said Kaizer Nyatsumba, the chief executive of the Steel and Engineering Industries Federation of Southern Africa warned.

NUMSA Secretary General Irvin Jim said his members are prepared to strike to bring about significant shifts in the low-wage environment he says plagues many of those employed in the sector.

Write to Devon Maylie at devon.maylie@wsj.com

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