Boston, MA 07/16/2014 (wallstreetpr) – Ford Motor Company (NYSE:F) joins other manufacturers in South Africa that are idling their plants because of the labor unrest in the Africa’s most advanced economy. General Motors Company (NYSE:GM) took a similar move last week because of the same problem. The Japanese automaker Toyota also announced plans to idle its manufacturing plant in the country.
The move by the automakers to suspend production in South Africa is linked to the shortage of vehicle components because suppliers are not able to meet the demand because of the strikes that have affected platinum and steel industries. Platinum workers have been striking for five months now while steel workers have joined in the past week after talks with employers collapsed.
While workers demanded 12-15 percent annual increases in wages, steel employers could only offer 10 percent. Therefore, without an agreement on the payment matter, strike became inevitable.
Impact on the economy
Besides the auto industry, the strikes have also impacted supplies to beverage can manufacturers. The strikes are also expected to lead to an adverse effect on South Africa’s economy, which contracted in 1Q because of the platinum workers’ unrest.
According to Alicia Chetty, Ford Motor Company (NYSE:F) spokeswoman, the company decided to suspend production at the Silverton assembly plant. However, she said the company will keep its Pretoria and Port Elizabeth plants running.
Missing production target
Following the halting of production at one of its South African plants, Jeff Nemeth, the head of Ford South Africa, company will suffer a production loss of 350 units per day. He also warned that the ongoing labor unrest may affect corporate investment in South Africa.
The South Africa’s mining sector has been soaked in labor unrest that some players have been selling their assets in the country to insulate their businesses from the widespread strikes that have made operations in the country so expensive that profits are declining.
Ford Motor Company (NYSE:F) plans to rollout several new vehicles this year as it tries to expand market share especially in emerging markets where it does not already have a strong foothold.
