June 23, 2010 / 10:15 AM / 9 years ago

China labour strife silences Toyota and Honda plants

TOKYO/HONG KONG (Reuters) - Japanese auto giants Toyota and Honda said major car factories in south China halted work on Wednesday due to strikes at parts suppliers, as worker discontent continued to jolt the industry and unnerve investors.

The stoppages are the latest in a series of strikes over pay at parts suppliers in Guangdong and other parts of China.

Denso (Guangzhou Nansha) Co Ltd., which is owned by Japan’s Denso Corp (6902.T) and supplies fuel injection equipment and other parts, stopped shipping on Monday. Some of its 1,200 workforce sat groups in front a plant warehouse on Wednesday.

“The salary is only 1,300 yuan (128 pounds) a month, including meal subsidies, while my rent costs me 200 yuan a month,” a worker surnamed Zhang from Hunan Province told China’s official Xinhua news agency.

“I feel not respected by the human resources department. They often say, ‘You can leave if you think other plants are better,’ when we ask for something,” another worker told Xinhua.

As a result of the Denso strike, a Toyota Motor Corp (7203.T) plant in Guangdong province that can make 360,000 vehicles a year has stood idle since Tuesday. Toyota said production would halt at the plant for all of Wednesday and did not know if it could restart on Thursday.

Honda Motor Co (7267.T) said it halted two plants of Guangqi Honda, one of the company’s joint ventures in China, after a strike at a Chinese factory in which Japan’s NHK Spring (5991.T) is a partner choked off parts supplies.

The two idled Honda plants can together make up to 360,000 Accord, Fit and other vehicles a year.

The strikes have exposed the vulnerability of tight “just-in-time” supply chains to restive rural migrant workers impatient with wage levels they say lag far behind booming economic growth and company profits.

“The automotive sector in China, especially for foreign companies, is highly profitable, but there hasn’t been an appropriate scaling of company profits and workers’ earnings,” said Chang Kai, a labour law professor at Renmin University in Beijing who earlier advised workers striking at another Honda parts plant.

“Strikes in an industry like this can have a copy-cat effect. Workers think, ‘If you can settle your problems by striking, why can’t I?’,” he said.

NHK Spring said workers at NHK-UNI Spring (Guangzhou) Co Ltd, have been on strike since late Tuesday. The factory, in which NHK Spring holds a 60 percent stake and a Taiwanese firm 40 percent, makes suspension springs and stabilizers for nearby assembly plants of Honda, Toyota and Nissan Motor Co (7201.T).

Honda shares fell 1.5 percent on Wednesday and have dropped more than 10 percent since the first strike at its supplier started at around mid-May.

Shares of Toyota lost nearly 9 percent in the same period, compared with a drop of 5 percent for the benchmark Nikkei average. The company’s shares ended down 1.7 percent on Wednesday, broadly in line with the Nikkei.


Chinese workers’ incomes have been rising in recent years, and while any wage rises won from the strikes may unsettle some investors, they do not threaten to unseat the country from its dominance as a cheap production base with a workforce held in check by the ruling Communist Party and state-controlled unions.

But the spasm of industrial unrest is a symptom of deeper discontent that could spread unless the government and companies learn to negotiate with a more assertive workforce, said Chang, the Beijing professor.

In recent weeks, strikes have broken out at a supplier of locks to Honda and a Toyota Gosei plant that makes parts for Toyota among others. All have since been resolved. China’s state-censored media have reported sparingly on the disputes.

“It’s an outcome of problems built up over a long time,” said Chang. “Workers no longer accept their conditions, but lack the channels to use milder ways to raise their demands. So they’re starting to see that strikes are a way.”

A striking Denso worker, reached by telephone, said no compromise was in sight and the workers believed the company was vulnerable to extended pressure. The worker asked to remain anonymous out of fear of punishment.

Denso spokeswoman Yoko Suga said no agreement had yet been reached with workers, who have been negotiating for higher wages and better benefits.

Employees are asking that wages rise from between 1,100 and 1,300 yuan per month to between 1,800 and 1,900 yuan, according to the Denso employee. Other recent disputes have been settled for raises smaller than that.

Automakers who have not faced labour disputes may also find themselves pressed to raise wages, said Lin Huaibin, an analyst with IHS Global Insight.

Carlos Ghosn, the chief executive officer of Nissan, told reporters in Japan on Wednesday that the company was “being careful” about suppliers to its Chinese plants.

“Obviously there is strong growth going on in China,” Ghosn said in Yokohama. “We have to be careful that within this growth we make sure that all the stakeholders — the suppliers, the employees, everybody — are being treated very well.”

Writing by Chris Buckley; Additional reporting by Alison Leung, Fang Yan, Taiga Uranaka and Chris Buckley; Editing by Chris Lewis and Alex Richardson

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