Wednesday, June 23, 2010

More Problems For China Labour Market As Workers Go On Strike

I was worried about the Impact Of The Foxccon Suicides On China Labour Market.

Yes, Foxconn had raised its workers pay by about 30%.

On today's Edge Financial article, there's another unsettling development.

China labour strife halts Toyota, Honda plants

  • Written by Nathan Layne & Don Durfee
    Wednesday, 23 June 2010 14:50

    Japanese auto giants Toyota and Honda said key factories in south China halted work on Wednesday, June 23 after a strike at a parts supplier, as worker discontent continued to jolt the industry and unnerve investors.

    A Toyota Motor Corp plant in Guangdong province that can make 360,000 vehicles a year has stood idle since Tuesday, after workers struck at a nearby parts supplier, Denso (Guangzhou Nansha) Co Ltd, owned by Japan's Denso Corp.

    Toyota said production would halt at the assembly plant for all of Wednesday and it had made no decision on when it could restart.

    Honda Motor Co said it halted assembly lines at one of two plants at Guangqi Honda, one of the company's joint ventures in China, after a disruption in parts supplies. The idled plant can make up to 240,000 Accord, Fit and other vehicles a year.

    The stoppages follow a series of strikes at parts suppliers in Guangdong and other parts of China, laying bare the vulnerability of stretched "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. "
    This effect may continue unless basic problems are dealt with."

    The Denso plant supplies fuel injection equipment and other parts and has stopped shipping since Monday. Clusters of workers in blue uniforms sat in front a plant warehouse on Wednesday.

    "The salary is only 1,300 yuan (US$191) 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.

    The flare-up apparently unnerved some investors.

    Honda shares fell 2.3% on Wednesday and have dropped more than 10% since the first strike at its supplier started at around mid-May.

    Shares of Toyota lost nearly 9% in the same period, compared with a drop of 5% for the benchmark Nikkei average. The company's shares were down 1.8% on Wednesday morning, in line with the Nikkei.

    Denso strike to continue
    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 role as a low-cost 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 among workers 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, a Toyota Gosei plant which makes parts for Toyota among others. All have since been resolved. Chinese 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.

    "We'll continue to strike today as the management failed to come up with a wage increase offer," said the worker, who declined to give his name for fear of retribution.

    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 ($161-$191) 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.

    "If they don't want to lose the China market, (car makers) will have to raise salaries, especially at parts suppliers," said Lin Huaibin, an analyst with IHS Global Insight. — Reuters


David Koay said...

The days of cheap labour could be coming to an end. China needs to move up the value chain and provide more value-add to their products. This kind of strikes could spread to other industries besides the auto industries if nothing is done.

Moolah said...

I do agree David.

And what is also concern is the appreciation of the yuan.

Yuan increase + salaries increase doesn't sound good for China's 'cheap labour market'.

And I wonder the impact of all this on China exports. :/