Honda has been facing a host of strikes at different plants in China recently. The latest is at a lock supplier, located at Southern China’s Pearl River Delta. The workers plan to extend their strike to a third day.
Demands this time are for an increase in annual wages of nothing less than 15%, improved allowances, benefits, the right to organize independent labour unions and a promise from management that anyone joining the industrial action won’t be dismissed. The workers at the plant donned white overalls and pressed up against the factory fences shouting for their demands while being watched by police. “We’re definitely going to strike tomorrow, our wages are too low,” said one of the workers.
Honda Lock have confirmed that shipments to Japan were unaffected for at least a day or two as they have enough existing stock ready for shipment, but went on to add that the negotiations were on going and a prolonged dispute could disrupt the flow of supply to Honda’s car plants. “We’re still gathering information, and we don’t know when the negotiations will end,” Honda Lock’s Hirotoshi Sato said.
Previous strikes at an exhaust pipes maker in Foshan ended late last Wednesday, and as production returns to normal, shipments to Honda’s suspended factories would return to normal on Friday. This seems to be only a temporary agreement though, as key negotiations over pay are still underway it could still turn in either direction.
As we mentioned before, strikes and their accompanying settlements have sparked a whole new revolution in terms of factory workers pay. If automakers are worried about the fact that China’s labour costs might outweigh profitability, they needn’t fret.
One auto analyst from JPMorgan said that wage hikes would have little impact on Honda’s profits as labour cost accounted for just 5 to 6% of its total revenue, even in Japan! “So if we assume wages in China are between one-fifth and one-third those in Japan, the cost of factory floor workers in China comes to around 2% of sales. Assuming factory wages in China were raised a uniform 30%, we estimate the impact on the China operating margin would be (a decline of) just 0.6 percent,” according to report written by analyst Kohei Takahashi.
More company executives agree that higher pay is inevitable for an economy like China which is developing immensely. There have even been some comparisons made between China and Japan in terms of their development.