Chinese Strikes: Uh-oh, Not Again! Honda Hit By Muffler Strike
Did we say that the strike at a crucial Chinese parts plant is being closely watched? Last week, a 20 percent pay rise was given at a Honda-owned transmission plant, and slowly, everything went back to normal. Until today. Honda is in trouble again.
Now it’s a few hundred workers at a muffler supplier in Foshan, Guangdong Province. They walked off the job yesterday, The Nikkei [sub] says. The plant has no capital ties to Honda, but Honda depends on them until an alternative is found. Also, the plant is in the same Foshan as Honda’s transmission plant. A Honda spokesperson in Toyko said that a lack of exhausts will halt work Wednesday at one of its three auto assembly plants in China.
The New York Times sees “growing signs that China’s huge migrant work force is gaining bargaining power.” An article that appeared an hour ago in The Nikkei [sub] raises the specter of “an end to the era of low wages on China’s mainland.”
Japanese-owned factories that supply parts to Nissan’s Chinese joint venture recently gave workers 70 percent pay raises. Says The Nikkei: “That was apparently done to stave off a shutdown of production lines at a time when the plants are operating at full capacity.”
Some suppliers prepare to open factories in inland cities such as Chongqing to escape the wage pressure in coastal areas. Whether that will work in the long run is doubtful. Pay hikes have a tendency of following workers and factories.
Those who think that wage pressure will create jobs in the U.S. will most likely be disappointed, whereas Vietnamese have reason for hopes. “A further rise in labor costs could prompt companies to consider moving some facilities elsewhere, such as to Southeast Asian countries,” says the Nikkei.
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- Analoggrotto Tesla owners are still smarter than anyone else, regardless.
Muffler making is fairly capital intensive for a supplier (I was a financial analyst for a major international supplier of exhaust systems)....lines robust enough to reliably generate 750,000 mufflers a year would likely cost $10 to $12 million US, and that does not include the tube mill or ancillary machinery like cut-off saws, lap machines, etc. Then, there is the issue of tool and die...., and the necessary intellectual capital of enginneering and quality skillsets. So, "throwing together" a supplier company to replace the production is not nearly as easily done as other posters on this site make it sound.....not impossible, just not easy AND time consuming....eventually the constant cost cutting in the auto-supply industry HAD to reach the rock bottom cost....and it appears in China, with certain components, it has...
The Nikkei is not quite ight to say Honda has no capital ties. It owns 70% of the Japanese company that has a 65% stake in the striking factory.