Chinese Strikes: Honda Production Partially Resumes After 20% Raise
Production at the Honda parts factory in Foshan, China, partially resumed this Chinese afternoon after Honda offered to increase the wages of striking workers by 366 yuan ($54) a month, company officials told The Nikkei [sub]. This reflects a pay hike of 20 percent.
Average wages at the Dongfeng Honda Automobile Parts Co. in Guangdong Province in southern China had been 1,544 yuan ($226). After the raise, a worker will make $280 a month, including benefits.
Fewer than 100 of the factory’s 1,900 workers are holding out for more.
Honda’s Chinese auto assembly operations will remain idle until at least Wednesday to allow time for the transmission production to get into gear. Honda will decide on Tuesday whether and when to restart automobile production in China.
The strike at a key plant and its effects on Japan’s second largest auto maker has been closely watched. Workers at parts suppliers usually are paid less than workers at auto makers. With just-in-time manufacturing, they wield a lot of power.
Honda produces approximately 3000 cars per day in China, and has plans for expansion says the New York Times.
Car sales in China are expected to rise between 17 and 25 percent this year, to a total of 16 to 17m cars. Workers want a slice of the pie and the 20 percent raise sets a precedent. Work stoppages in China are increasing, says the NYT.
In Beijing, around 1,000 workers at a parts supplier of Beijing Hyundai walked off the job. They returned after management promised rises, state media said.
There is a huge problem with using market currency exchange rates with which to judge comparative pay levels. A much more applicable number is the purchasing power parity exchange rate. http://en.wikipedia.org/wiki/Purchasing_power_parity
Uh-Oh! Now the UAW is going to want 20% too.
Higher labor costs in China is an inevitability, this is known, especially being that the Yuan is expected to be revalued shortly. This is a double-edged sword, especially for Japanese producers. Higher wages, a higher Yuan, will mean higher costs for products produced in China, but it also means more profits from the Chinese market as the population becomes wealthier and the currency appreciates. As China moves to become the world's economic engine due to their domestic demand, export-centric Japan benefits; since China is Japan's largest export market, and the China-Japan trade deficit runs in favor of Japan and will continue to do so as labor costs and currency rises (protecting Japanese jobs). But I'm stating the obvious, but what is a great unknown is this tranistionary period where we still are now; how will foreign car companies handle this shift? How will companies adapted to cheap-labor in China handle a steady rise in worker wages relative to an ultra-competitive market and razor thin margins? What is certain is that this won't be the last strike at a foreign-run automotive plant in China.
"transmission production to get into gear" Ha Bertel you crack me up. Puns in your second language. Mind you, he who would pun would pick a pocket.