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South Africa Labor Strike Hits Automakers

F TM NSANY GM

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Media reports suggest that the ongoing labor strike in South Africa is costing the automobile industry almost 3,000 vehicles a day. Major car manufacturers like Ford Motor Co. (F - Analyst Report), General Motors Company (GM - Analyst Report), Toyota Motor Corporation (TM - Analyst Report), Nissan Motor Co. Ltd. (NSANY) and Bayerische Motoren Werke AG (BMW) have been affected by the strike that began on Monday.

Almost 30,000 workers in Pretoria, Durban, Port Elizabeth and East London are participating in the strike. Toyota and General Motors witnessed 80% absenteeism.

The strike was called by the National Union of Metalworkers of South Africa (NUMSA) to demand an increase in wages, better medical benefits and increased flexibility in shifts. While the employers are willing to increase wages, they are not accepting the percentage demanded by the union, which is more than double the inflation rate forecasted by the South African Reserve Bank for 2013.

The strike is causing huge losses to the automakers. While Toyota is losing over 700 cars daily, BMW is losing almost 350 sedans. Nissan’s daily output of almost 250 units has also been affected.

However, automobile manufacturers are not the only losers in this strike. The South African economy will also be affected significantly as the automobile sector contributes 6%–7% of the GDP and 12% of the country’s exports. Both foreign direct investment and economic growth will be hampered. This will add to the problems of the economy, which is already affected by strikes in the mining sector.

Nissan currently carries a Zacks Rank #1 (Strong Buy). Ford carries a Zacks Rank #2 (Buy) and General Motors carries a Zacks Rank #3 (Hold).

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