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Sep 21, 2012

Strong growth in sale of imported cars ‘a concern’, says Ford

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The growth in local sales of imported vehicles compared with those sold by local manufacturers “is a concern”, says Ford Motor Company of Southern Africa (FMCSA) president and CEO Jeff Nemeth.

The South African automotive industry set a new record last year, with 69%, or 272 000 units, of all vehicles sold in the domestic market imported, up from 2010’s 66%.

Nemeth says there is the possibility that imported vehicles can gain an even stronger foothold in the South African market as the local automotive industry is scheduled to sit down next year to negotiate a new multiyear wage deal with labour. Other sectors are also due to carve out wage deals.

A three-year agreement signed in 2010 provided for an across-the-board wage increase in the auto sector of 10% in 2010, and a 9% increase in both 2011 and 2012. However, this followed an eight-day strike at vehicle manufacturing plants. This strike was also sandwiched between labour action in other related industries.

“Any protracted stoppage will open the door for import growth. It will have a long-term effect on the domestic manufacturing industry,” emphasises Nemeth.

Commenting on recent events at Marikana, and the labour dispute that fuelled the death of 44 people at the platinum mine, Nemeth says he hopes it will act as a catalyst for government and the labour unions involved to “address the issues that precipitated the tragedy”.

Why did circumstances get to that point? I am hopeful the ANC and Cosatu will seize the opportunity to display leadership in this matter to avoid labour conflicts such as those we have seen recently.”

FMCSA’s payroll is certainly bigger than it was in 2010.

As the company is now a volume producer and exporter of the new Ranger pick-up, it has added 800 new jobs to facilitate a second shift at its Silverton plant, in Pretoria, where the Ranger is assembled, and a third shift at its pick-up diesel-engine plant, in Port Elizabeth.

However, says Nemeth, doing this is easier said than done.

Implementing a second shift at a vehicle assembly plant requires careful planning. When FMCSA did so on September 3, it was the first time since the plant opened in 1968.

Nemeth says the vehicle manufacturer had to ensure all the support services, such as transport, catering and so forth, were in place, and that it could receive trucks 24 hours a day. Ford’s component suppliers also had to buy in to the idea of producing more vehicles a day.

At the moment, the supply base – a mix of old and new suppliers – “is struggling”, says Nemeth.

“There is a 5 000-unit gap between what we want on our schedule and what suppliers can give us right now.”

However, he notes that this is “quickly improving”.

“We overbuilt 12 days out of the last 30, so things are stabilising now.”

Nemeth adds that the extra shifts come as a result of increased global demand for the Ranger pick-up, which “is a good problem to have”.

“The most surprising is the demand from Europe. I keep on expecting it to scale back, but it is not happening. The Ranger continues to outstrip our estimates.”

Nemeth adds that Ford has not even yet “rolled out” the “full marketing plan” of the Ranger.

FMCSA is currently building largely high-spec double-cabs, and only a few single-cab workhorses, which means the company is still catering mostly for the demand of the private individual, and not yet that of companies or small businesses.

“The demand for double-cabs is outstripping our expectations. “We are working hard to build more.”

Nemeth notes that European double-cab Rangers are even higher specced that those models sold in Africa.

“It seems that European bakkie sales, which were traditionally aimed more at fleet customers, have penetrated the retail market and secured some new customers.”

FMCSA will eventually export the Ranger to 148 markets, mostly in Africa and Europe.

Nemeth says August was be a “rough month” for FMCSA in terms of new-vehicle sales as stock levels were “at the lowest level in history”. However, there will be an easing in September as supply stabilises.

Edited by: Martin Zhuwakinyu
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