Honda’s China Woes Continue, 2 Plants Shut Down

Honda’s China Woes Continue, 2 Plants Shut Down
The Japanese car-maker Honda’s travails in China continued despite announcing wage hike as two more plans were shut down today after employees continued to their tools-down agitation and declining to accept the modest pay hike announced earlier.

The Honda factories were paralysed as strike in supplier units continued, state run Xinhua news agency reported today.

Two factories of Honda's joint venture Guangqi Honda in Huangpu district and Zengcheng City in Guangzhou which is the capital of Guangdong province, had to suspend production due to the strike at Foshan Fengfu Autoparts Company (Fengfu), a parts supplier, said Honda spokesman Zhu Linjie.

A total of 120 workers are still on strike. Eight worker representatives are negotiating with the company, demanding a pay rise of 300 yuan (USD 44) a month, Zhu said.

Fengfu, Guangqi Hongda's only supplier of mufflers and exhaust pipes, employs 489 workers, whose monthly salaries range from 1,500 (USD 220) to 1,800 yuan, Zhu said.

Fengfu asked workers to resume work late Tuesday while it planned a payment adjustment scheme. But workers rejected the offer Wednesday morning. It is not clear when the factories will resume production, Zhu added.

Fengfu is a JV of Japanese company Yutaka Giken which is a subsidiary of Honda, and Taiwan's Moonstone Holding.

Enditem Honda, the second largest automobile company in China and has successfully en-cashed on the burgeoning automobile market here, runs three of its four assembly lines as joint ventures with Chinese carmakers to serve the domestic market. It has two factories in association with Guangzhou Automobile and one with Dongfeng Motor Corporation.

Honda's fourth Chinese factory makes its small car Jazz solely for exports. Honda currently makes 6,50,000 cars annually in China, and intends to ramp this up to 8,30,000 units as the car market continues to grow rapidly.

The latest strikes in Honda coupled with the big salary raises announced by Foxconn to end the suicides reflect rising tension between workers and companies, especially those from overseas, that treat China as a source of cheap labour, the state-run China Daily said in a report.

The growing labour unrest in southern China may not only make wage hikes a trend in near future but also it maybe an opportunity to push local manufacturers to update industry and promote production efficiency, experts said.

"The suicide-plagued Foxconn and strike-bothered Honda resolved their problems by increasing wages. Their methods may set a model for other enterprises facing the same problem," said Shenzhen Association of Arts and Crafts Industry deputy general Wang Shaoqing.

The Pearl River Delta region in Guangdong province is a major manufacturing base in the world, where tens of millions of migrant workers from Chinese hinterlands churn out goods for top global companies and export-oriented local small- and medium-sized manufacturers.

Zeng Li, an official from the Dongguan branch of the Federation of Hong Kong Industries, said the profit margin for Hong Kong companies in Dongguan is 10-20 per cent.

"If labour cost increases their profit will fall and they may even shift their factories to other countries that can provide cheaper labour," Zeng warned, and pointed out that some Hong Kong businessmen are already considering moving their business to Southeast Asian nations such as Vietnam due to the rising pressure of higher labour cost in China.

But Wang expressed the hope that a massive move of overseas companies from the Chinese mainland to other countries is unlikely, saying "although some neighbouring countries offer cheaper labour, their political and business environments are not as good as China's. Moreover, the 'Made-in-China' label has already won recognition in the global markets."

Stating that wage hikes are an unavoidable trend, he said, "migrant workers will go to factories where they can get higher pay and better working conditions."

Foxconn and Honda's wage rises will put big pressure on many small-scale original entrusted manufactures in the region, he added.

Institute of Foreign Trade at the National Development and Reform Commission director Zhang Yansheng said China's advantage of cheap labour may disappear in a decade. Some companies already have found difficulty in hiring migrant workers because the wages they want to pay are too low, he pointed out.
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