THE strike in the steel and engineering sector is likely to lead to reduced investment and job losses in the R30bn a year vehicle components industry, says Ken Manners, the vice-president of the National Association of Automotive Components and Allied Manufacturers.
Most of the automotive headlines during the three-week-old strike by the National Union of Metalworkers of SA (Numsa) have concentrated on the potential losses that vehicle manufacturers might suffer. But Mr Manners, who is also joint MD of SP Metal Forgings, said their suppliers were also taking pain.
Only about 20 specialist components companies are directly affected by the strike, but Mr Manners said that the effect on their sub-suppliers and their customers — producers of vehicles and components — would be considerable.
His own company, whose products include wheel hubs, drivetrains, transmissions and exhausts, was in danger of losing export orders to suppliers in other countries if it failed to meet orders.
Even companies that were able to make up production after the Numsa strike faced “staggering” overtime and premium freight costs.
Exports last year earned South African components producers more than R42bn, a 5.7% improvement on 2012.
Just over 40% of that came from platinum-based catalytic converters — devices that reduce harmful vehicle exhaust emissions. South Africa supplies about 10% of the global market and nearly 20% of General Motors vehicles with catalytic converters.
Other major components exports from South Africa include engine parts, tyres, stitched leather seats, silencers, exhausts and transmissions.
Germany was the main destination for South African components last year, reflecting the fact that Mercedes-Benz, BMW and Volkswagen have been particularly successful in helping South African-based components companies supply their global networks.
Last year Germany accounted for R12bn of South Africa’s export total, with catalytic converters making up more than half.
That was more than three times the next biggest market, the US, with R3.7bn.
According to the 2014 Automotive Industry Export Council, the prospects for future export growth are considerable, if the industry can fulfil its vision of building 1.2-million vehicles a year.
That would give both the assemblers and the suppliers the volumes and the unit costs to become even more competitive.
But not if the industry continues to build a reputation for strikes and lost production. Mr Manners said the inevitable result of strikes such as this one was lost jobs and investment. Labour-cost increases from wage agreements could not be passed on to customers, so companies would have to cut their work forces. Increased factory automation was “a certainty”.
He added: “How can one estimate the extent of potential jobs not created in the next five to 20 years because labour instability encouraged the next big automotive investment to be made in a country other than South Africa?”