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Print Edition> Business
UPDATED: June 12, 2010 NO. 24 JUNE 17, 2010
Strike Two
Honda China on wobbly tires as a second worker's strike ripples through its supply chain


BACK IN BUSINESS: Cars are assembled along a Honda production line in Wuhan, capital of central China's Hubei Province. Dongfeng Honda Automobile Co., affected by the strike in a parts plant in Guangdong, has returned to a normal production schedule (HAO TONGQIAN) 

For Japan's second largest automaker, Honda Motor, the blows keep coming one after another. Workers at a parts plant funded by Honda's affiliate Yutaka Giken in Foshan, Guangdong Province, went on strike June 7 demanding pay increases, adding to a slew of labor disputes facing the company.

The strike is the second within a month, following one at a transmission parts factory in the same province. Details of the second strike are limited, but so far Honda representatives said that the strike has not affected the car company's production.

The first strike has been all but resolved. Nanhai Honda Auto Parts Co. Ltd. in Foshan, south China's Guangdong Province—the site of the first strike—resumed full production on June 3, said the Japanese automaker.

Honda spokeswoman Akemi Ando said most of the 1,900 workers at the wholly owned parts factory had agreed to the management's offer to increase their average starting salary from 1,544 yuan ($226) to 1,910 yuan ($280) per month.

Workers left their positions on May 17, pushing for wage hikes, year-end bonuses and a promise to not fire any strikers. With few components built and inventories running low, the four Honda assembly plants in China—including Guangzhou-based Guangqi Honda, a joint venture with Guangzhou Automobile Group, and Wuhan-based Dongfeng Honda, a joint venture with Dongfeng Motor Group—were forced to suspend production.

Established in October 2005, the Nanhai parts factory supplies around 80 percent of the transmissions Honda uses to assemble cars in China. The rest were brought in from Japan. Like many of its domestic counterparts, the factory has basked in the glow of an auto buying rush that started last year, and is struggling to keep pace with demands.

China's auto parts industry reported an average profit margin of 8-10 percent in 2009, almost double that of their foreign rivals, said a report by AlixPartners LLP, a global business advisory firm headquartered in New York.

The employees, however, have been largely left out of the wealth boom. Honda workers said they earn 900-1,500 yuan ($132-$220) a month depending on experience and overtime, and could hardly support themselves on such minimum compensation.

"My workload has doubled in the past two years after the factory ramped up output, but my salary has stayed the same," said an employee, who asked to remain anonymous, to National Business Daily.

In addition, workers complained about unfair salary differences between Chinese and Japanese employees. "Japanese staff earn $300 a day, and their job only involves training us to use the heavy machinery," a striking worker surnamed Ma told Xinhua News Agency.

Painful losses

Honda has safely navigated the labor crisis, but the dispute was not settled without setbacks.

Estimates hold that the prolonged strike incurred a loss of nearly 300 million yuan ($44 million) on Nanhai Honda. Worse still, there are reports that the four assembly plants suffered 200 million yuan ($29.3 million) per day in losses during the 10-day strike when workers left their machines idle.

Meanwhile, the strike has cast an ominous shadow over future prospects for the Japanese company in China. One day before the strike broke out, Honda announced aggressive expansion plans, aiming to boost its total China capacity by 30 percent to 830,000 units a year by late 2012. Honda said it expected to recoup the thousands of units of production losses through additional shifts in the months to come.

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