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The labor strike in South Africa entered its 12th day today after the National Union of Metalworkers of South Africa (NUMSA) rejected the 10% wage hike offer made by automakers yesterday, according to media reports. The union, with about 30,000 workers, has been demanding a 14% increment. 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 Aug 19.

Moreover, the workers are planning to intensify the strike, which has already spread to other sectors like construction and airline. To add to it, textile workers, petrol station attendants, retail auto workers and gold miners are planning to join the strike from next week, which could take the total striking workers in South Africa to 220,000 from 120,000 at present.

The strike, which is gradually gaining traction, could cripple the economy of South Africa, which is already suffering from significant losses due to the halted automobile production. While Toyota is losing over 700 cars daily, BMW is losing almost 350 sedans. Nissan’s daily output of almost 250 units in South Africa has also been affected.

The South African economy will 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. In fact the rand has already hit 4-year lows due to the impact of the strike. This will add to the problems of South African economy, which has already received a severe blow owing to the strikes in the mining sector for over a year.

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

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