The biggest challenge Mercedes-Benz South Africa (MBSA) faces in producing the C-Class in East London is labour instability, and not energy supply security.

MBSA CEO and executive director for manufacturing Arno van der Merwe says it is vital for South Africa to have “more structured and organised” wage negotiating forums in place, in general.

He warns that “another, six-, eight-week strike will have a more critical impact than what most people will even be able to contemplate – it is a very serious matter”.

The South African automotive industry experienced an eight-week strike in 2013, and was also affected by a six-week strike in the steel and allied industries in 2014.

MBSA had to claw back lost production through the flexibility, ironically enough, offered by its staff.

Van der Merwe notes that load-shedding is indeed a challenge for the local arm of the Daimler group, but that the East London plant has been working proactively to counter its impact.

Load-shedding is an agreement between Eskom and the Buffalo City municipality, with the municipality charged with reaching the targets set by Eskom, explains Van der Merwe.

MBSA works to contribute to those targets by proactively minimising its energy use as and when possible.

“We try and help during peak periods so that we do not become subject to power cuts. We are working on reducing our energy demand by 20%. It is a work in progress.

“To date, these measures have worked well.”

Van der Merwe says the effects of an uncontrolled shutdown on a highly automated production plant with around 600 robots will be extensive and costly.

“It will take hours to recover, and will cost hundreds of thousands of rands.

“Constant and reliable energy supply is mission critical.”

Van der Merwe notes, however, that it is important for all parties involved to work together to solve the problem in the coming months, rather than overanalysing the events that created the crisis in the first place.

He says it is critical for the situation to stabilise, and for new generation capacity to be introduced to fill the demand-supply gap.

The MBSA plant operates on a five-day, three-shift (24-hour) basis.

It produces the C-Class for the local market, as well as more than 60 export markets, while also assembling trucks and buses for the South African market.

C-Class production last year reached 46 800 units, of which 33 688 units were exported, as the East London plant ramped up production of the new model, while truck assembly reached 6 300 units.

Previous reports place the plant’s new capacity at 100 000 units a year, following a R5-billion investment.

Van der Merwe does not want to divulge anticipated export sales or production figures for 2015.

MBSA sold 28 370 Mercedes-Benz cars in 2014, up 25.3% on 2013 numbers, taking pole position in the domestic premium luxury car market, with the jump largely driven by product offerings in the compact car range.

AMG sales were up 63%, to 1 604 units.

MBSA last year stopped reporting model-specific sales, providing only total truck and car sales numbers to the market on a monthly basis.

Van der Merwe says MBSA will resume reporting model-specific sales once there is a proper regulatory structure put in place by the Department of Trade and Industry to do so.

Such a structure should satisfy compliance demands from MBSA’s parent company, the Daimler group.

MBSA is not currently legally obligated to provide sales statistics.

The Numbers
MBSA has increased revenue by 5% in 2014, to R45.32-billion, while earnings before interest and tax fell to R3.08-billion, down from R3.54-billion in 2013, says MBSA CFO Herbert Werner.
He says rand weakness against the major currencies had, in 2014, “eaten” all the gains made by growing sales volumes and significant price increases.

New products to flow from the MBSA stable this year include the S500 plug-in hybrid, the AMG GT, the C 63 AMG, the V-Class, the new Vito and the Mercedes-Maybach S500.

MBSA will also open its new AMG driving academy this year.

R130m Training Investment
Van der Merwe has announced that MBSA and the National Treasury, through its Jobs Fund, will spend R130-million on building a learning academy in East London.

The cofunded facility will address the MBSA plant’s technical needs, as well as that of the region, by churning out electricians, fitters and mechanics, among other skills sets.

The academy is expected to open towards the end of the year.