Boston, MA 07/07/2014 (wallstreetpr) – General Motors Company (NYSE:GM) has been forced to halt vehicle production in South Africa amid labor unrest. The company warned over risks of missing production targets this year because of the labor problem.
The month of July started on a bad note for the metal industry in South Africa as failed negotiation talks between workers and employers led to an indefinite strike whose end is hard to predict.
As a result, General Motors Company (NYSE:GM) announced halting of production at its Port Elizabeth plant, citing component-supply challenge. The company’s spokeswoman Gishma Johnson confirmed the closure of the assembly facility.
The latest strike involves more than 220,000 metalworkers, especially in the steel industry, and manufacturers of car-components have been widely affected, crippling car-component supplies.
Collapse of wage talks
Negotiations over pay increase collapsed when workers rejected an improved offer from steel employers. Under the auspices of Steel and Engineering Industries Federal of South Africa (Seifsa), steel employers offered to increase the wage of the lowest paid worker by 10 percent, citing that that was the best they could offer to the workers. However, the workers rejected the plan while demanding at least 12 percent boost to the wage of the lowest paid person in the steel industry. When a deal failed, a strike ensued.
Experts are already warning over economic contraction in South Africa because of the widespread strikes that have also impacted platinum production.
General Motors Company (NYSE:GM) intends to produce 50,000 vehicles in South African on a year basis. However, the labor unrest in the country is likely to derail the plan especially considering that the spokeswoman Ms Johnson said they “don’t know how long the strike will continue.”
Sales increase at GM
Although General Motors Company (NYSE:GM) is impacted by labor challenge in South Africa and the global recall of faulty cars, sales at the company have been strong even as analysts predicted otherwise. It is emerging that with the recalls on, many customers are visiting showrooms and the increased visit to showrooms has lead to increase in sales. The company noted one percent increase in sales in June compared with the expected fall of 6.3 percent in that month.
