Toyota to restart China plant next week after vendor strike

ERJ staff report (AN)

SINGAPORE (Bloomberg) -- Toyota Motor Corp. is preparing to resume production at its factory in Guangzhou, China, early next week after a supplier hit by a worker strike partially reopened last night, while Nissan Motor Co.'s plant is back to normal operation, the companies said.

The Toyota plant will start operations next week after supplier Denso Corp.'s factory resumed partial production last night at its plant in Guangzhou, said Toyota spokeswoman Mieko Iwasaki in Tokyo.

Widening labor unrest has forced auto parts makers to raise wages in China, increasing production costs for Toyota, Nissan and Honda Motor Co. in a nation that accounted for about a fourth of Toyota's vehicle sales last year. A shrinking supply of low-cost labor in the world's largest auto market's manufacturing regions is increasing workers' bargaining power.

“Strikes and disputes between workers and employers are spreading in China,” said Ricon Xia, an analyst at Daiwa Institute of Research in Hong Kong. “What they can do at the current stage is increasing wages for workers to keep their factories up and running.”

Nissan restarted production in Guangzhou today, said spokesman Akihiro Nakanishi. Toyota's plant was closed for a third day today as strikes spread to at least eight car parts factories in China.

Toyota's factory in Guangzhou will remain closed until early next week, after production was suspended June 22 because of a walkout at a factory belonging to Denso, a supplier of automobile parts to companies including Toyota and Honda Motor Co. The parts maker, Japan's largest, is about 23 percent owned by Toyota, according to data compiled by Bloomberg.

Nissan halted output at a plant in the city of Guangzhou for at least two hours Wednesday because of a strike, which has since ended, at parts maker NHK Spring Co., said Akihiro Nakanishi, a spokesman for the carmaker.

The strike at NHK Spring's China factory began June 22 and ended late yesterday, said Hiroaki Saito, a spokesman for the Yokohama, Japan-based parts maker. The plant makes coil springs and stabilizers for cars, supplying both Honda and Nissan.

Mitsuru Yonekawa, a spokesman for Nissan, also based in Yokohama, said the company was still assessing whether today's production would be affected.

“These issues, including wage increases, strikes and improving working conditions, will keep smoldering,” said Satoru Takada, an analyst in Tokyo at TIW Inc. “It seems to be a favorable time for workers to strike.”

NHK Spring Strike

Honda also closed two car factories in Guangzhou because of NHK Spring's walkout and reopened them today, the carmaker said.

Satoshi Ozawa, an executive vice president at Toyota, said the carmaker plans to improve efficiency to make up for the wage increases.

“Given China's rapid economic growth, the possibility that a problem would occur was well within our expectations,” Ozawa said today at the company's annual shareholder meeting in Toyota City, Japan, where the automaker is based.

Toyota supplier Denso Guangzhou Nansha Co., a joint venture in Guangzhou, halted production June 22 as workers walked out demanding higher wages and improved benefits, said Toshihiro Nishiwaki, a spokesman for Denso.

Denso

About 300 workers are involved in the strike, Denso's Beijing-based spokesman Shen Meihua said June 22. The plant, which makes fuel-injection systems, employs about 1,100 people, according to a company report.

Denso, based in Aichi, Japan, couldn't immediately confirm whether the strike is continuing today, spokesman Goro Kanemasu said by phone.

Toyota, the world's largest carmaker, builds Camry sedans, Highlander sport-utility vehicles and Yaris compact cars at its Guangzhou factory. The Nissan plant that was closed yesterday makes the Tiida and Sylphy models.

“The events are not making us change our plans” in terms of inventory management or automation, Carlos Ghosn, Nissan's chief executive officer, said yesterday in Yokohama.

Foxconn, Honda

Worker unrest has forced Japanese automakers and other foreign manufacturers including Taiwan's Foxconn Technology Group to spend more on labor. Suppliers to Toyota and Honda agreed to raise wages as at least six previous strikes broke out at their Chinese factories in the past month.

Honda agreed last month to a 24 percent raise for workers at a parts plant in Foshan, Guangdong, after a strike shut down all four of its China car factories. Another Honda parts supplier in Foshan was closed June 7 to June 10 by a walkout.

More than 20 Chinese provinces and cities, including the manufacturing hub Shenzhen, raised minimum wages this year to help companies recruit workers and to boost domestic consumption, the city government said this month.

Higher investment and improved wages in western China are deterring workers from migrating, pushing up pay in more industrialized regions like Guangdong in the south, said David Abrahamson, project manager at the China Center for Labor and Environment.

Workers say the pay increases are necessary to help keep pace with the rising cost of living in China. Inflation accelerated to an annual pace of 3.1 percent in May, the biggest increase in 19 months. Property prices in May jumped 12.4 percent across 70 cities from a year earlier, the government said on June 10.

Increasing wages may help automakers in the long run by boosting demand for cars in China, said Andrew Phillips, an analyst in Tokyo at BNP Paribas SA. Carmakers are producing in China to meet domestic demand, not because of low costs, he said.

“Wages as a percentage of revenue are tiny,” Phillips said. “The concern is more loss of production.”

From Automotive News (A Crain publication)