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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

For an experienced multinational like Honda, the strike was not detrimental to its operations. Even so, it's unfortunate the strike had to occur in one of Honda's most important markets. China toppled the United States from its decades-long position as the world's largest auto market. Honda now counts on China for around 17 percent of its global sales. It sold 55,000 vehicles in China in April 2010, a robust surge of 31 percent year on year.

It seems that China has become a safe haven for the Japanese automaker, as it seeks a return to profit after a collapse in car sales due to the global economic crisis. The Japanese auto market has remained lackluster and sales in the United States and Europe have not rebounded to pre-crisis levels.

In China, Japanese carmakers are racing to catch up with rivals after arriving relatively late in the market. The first Honda rolled out of a plant in Guangzhou in 1999, 16 years after Chrysler started making Jeeps in the country.

Even in the wake of the strike, Honda has dismissed worries over its China outlook. Zhu Linjie, a spokesman with Honda China, said its vehicle supplies remain undisrupted thanks to a high inventory, and the company will not delay the introduction of new models this year.

But the strike is bound to tarnish the brand image of Honda and take steam out of its growth momentum, said Li Chunbo, a senior analyst with Beijing-based CITIC Securities Co. Ltd.

Eager to compete with local rivals, Honda has been preoccupied with aggressive expansion, but put little effort into product quality and compensation for employees, said Li.

This will only weigh down consumer confidence and put the company on a tight spot among fierce competition, he said.

Labor concerns

The export slump in late 2008 led to closures of numerous factories in coastal provinces, sending millions of migrant workers home, many of which were content to resume farming practices in the countryside or land jobs in inland cities near to their hometowns. This eventually left export factories short on labor when orders rebounded early this year.

The Honda strike is widely considered a vivid illustration of how Chinese workers are growing impatient with the long hours and low pay at coastal factories.

"It seems that migrant workers are now more concerned about their wages, benefits, social status and working conditions," said Chang Kai, Director of China's Labor Relations Institute of the Renmin University of China.

The labor shortages will give the employees greater bargaining power for their own interests, he said.

Zhao Hang, an automotive engineering professor at the China Automotive Technology & Research Center, agreed. "If the automakers continue to turn a blind eye to the needs of their employees, they will lose more skilled workers," he said.

The strikes are also a forewarning that the manufacturers must sharpen their technological competitiveness and wean their reliance on cheap labor as a source of profit, he said.

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