Chinese Strikes: It Ain't Over Until It's Over – Toyota And Honda Down Again

Bertel Schmitt
by Bertel Schmitt
chinese strikes it ain t over until it s over toyota and honda down again

You thought the strikes that affected Honda and Toyota in China are over, and both are happily churning out cars again? That makes two of us. But we are mistaken.

Toyota stopped the lines at their Guangzhou assembly plant Tuesday, after they had run out of fuel injectors. The parts were supposed to come from Toyota-affiliated Denso (Guangzhou Nansha) Co., where workers went on strike on Monday, says The Nikkei [sub]. This Wednesday afternoon in China, the Denso workers are still saying “hell, no” (or Chinese words to that effect), and the Toyota plant sits idle. Reuters says no decision has been made to re-start production.

Toyota’s Guangzhou plant accounts for more than 40 percent of Toyota’s Chinese output.

According to Nikkei’s information, the Denso plant also supplies parts to Honda, Suzuki, and Mazda.

Lo and behold, today Honda halted production at one of two plants of their Guangqi Honda joint venture. An operation spokesman told Reuters he does not know when production will resume.

A little later, the second plant of their Guangqi Honda JV shut down. This time, because of a lack of springs. Turns out that a Chinese factory of Japan-owned NHK Spring was hit by a strike late Tuesday. Reuters says, they also make springs for Toyota and Nissan.

As a sign that it’s news when a Japanese auto maker remains open in China, The Nikkei [sub] quotes Nissan’s CEO Carlos Ghosn, who said today that “so far, things are going smoothly” at Nissan in China. Let’s hope they are well stocked on springs.

An interesting pattern evolves:

  • Strikes at strategically chosen suppliers, often involving only a few hundred strikers, can paralyze big manufacturers. The Chinese did learn well from the U.S. and Europe.
  • There are no strikes at carmakers themselves, which are part of joint ventures, usually with government-affiliated partners. They shut down because they have no parts, not because there is a strike.
  • So far, the strikes affect only Japanese carmakers. The lines at GM, Volkswagen, Ford, BMW etc. are running.

GM’s Kevin Wale remains unimpressed. He’s seen worse at home. “It’s common. Labor issues occur everywhere, but China’s huge market potential is more important,” said Wale to China Daily.

Meanwhile at the media front, that epitome of journalistic integrity, ABC News, can’t help themselves and reports that “domestic media has been instructed not to report on the subject.” As proof, they cite an anonymous “internet user” who says: “The Denso strike did happen but authorities have sealed off the news.” You don’t say.

Someone should tell them that it’s as easy as going over to state-owned China Daily, where the strikes are daily news fodder. They have the Denso strike right here. Same at Global Times, the English version of the Communist Party’s Newspaper, People’s Daily.

Global Times even mentions a report by the All-China Federation of Trade Unions that warns: “The accumulation of these demands and problems has begun to have a negative effect on our country’s political and social stability and sustainable economic development.” Doubting China’s political and social stability? In a party-owned paper? Where’s the world coming to?

Update: Reuters says NHK strike settled, Honda plant 2, up again. Plant 1 still closed due to Denso strike.

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  • L'avventura L'avventura on Jun 23, 2010

    As with everything in China, nothing is a coincidence, especially when it comes to labor. Most strikes don't happen because labor and wage disputes have to happen through the ACFTU (All-China Federation of Trade Unions). Unionization outside the ACFTU is illegal in China. And let's keep in mind the ACFTU is a quasi-governmental organization that has close ties with the Communist party; its essentially operated along with the Ministry of Labor and States Secrets Bureau. Basic economic principles dictate wage parity; if you are a worker in one plant and you hear other plants are getting a huge wages you would strike as well, this hasn't happened en masse. You would expect that workers all over China would be demanding pay increases. Clearly, these strikes happen in a controlled manner with the consent of the Communist Party. Let's also consider Toyota has been the model for foreign companies doing business in China, the Japanese-side always meets with Chinese-side every few months to monitor labor situations (not leaving a Foxconn like situation), and they promote Chinese from within to high-level management jobs with a clearly defined career path instead of bringing people from overseas. For their part, neither Honda or Toyota are being villainized in China, and these strikes are settled within a matter of days (the Toyota strike last week was settled in 24 hours or so). Its a prelude to the China hitting peak of the Lewis curve, basically a movement from excess supply of labor to a perfect elasticity of labor at the going wage rate. The message is clear; Chinese wages have been kept down due to 'labor surplus' from in-land migrant workers, but China is moving towards wage parity and a demand-driven economy instead of an export-driven one. A perfect complement to China's announcement to allowing the Yuan to appreciate and the upcoming G20 meeting.

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