The National Association of Automobile Manufacturers of South Africa (Naamsa) had had its first meeting with the Department of Trade and Industry (DTI) to discuss the way forward for the embattled automotive industry, said Mercedes-Benz South Africa (MBSA) president Dr Hansgeorg Niefer on Thursday.

He said it was impossible for him to provide more detail at what he termed “this early stage”, however, he did note that a solution was needed fast, and that it could possibly entail aspects such as tax reductions or support funding.

The automotive industry last week approached government to provide some form of assistance for it to survive the current chilly economic climate, punctuated by rapidly declining vehicle sales and subsequent job losses.

The National Association of Automotive Component and Allied Manufacturers had, on Wednesday, estimated job losses in the South African automotive industry to have reached 25 000 people over the last year.

MBSA itself was reducing its salaried staff by 150 people. This process was to be completed by the end of February.

“We are working very hard to avoid the retrenchment of our hourly-paid employees.

“We're still convinced we'll need them at a later stage. We've invested a lot in skills development and we just don't want to lose them,” said Niefer.

He added that MBSA had made an employment agency available, free of charge, to any retrenched staff to find new positions elsewhere.

MBSA had implemented an extended plant shutdown in December and January to counter the drop-off in sales, and was currently still operating on a five-day production week. Some other vehicles manufacturers had already cut back to a four-day production week.

However, warned Niefer, should February sales drop by more than 10% compared with February 2008, the company would also be forced to consider a four-day week.

MBSA sold vehicles into the local market, and exported the C-class to the US, a market which had suffered a severe decline in sales in January.

Niefer said it was impossible to say how the cooling US market would affect C-Class exports from MBSA's East London plant, and that the company would only be able to calculate the real impact after March.

However, he added that he expected US president Barack Obama's economic stimulus plan to start kicking in at some point, and to somewhat stem the bleeding.

Niefer noted that MBSA had also witnessed a trend in the US where consumers downsized to smaller, more fuel efficient vehicles.

“In the US, the C-Class is a small vehicle. This could help ensure that the decline in our exports is not as bad as what it could have been.”

Niefer noted that one supplier to MBSA had closed down – Kolbenco, a piston manufacturer.

He said the company had a large deal with a US manufacturer, which then terminated its order.

“He's taking all his equipment to another plant overseas and he'll then supply our sister plant in Germany.”

Niefer said MBSA's best case scenario was for vehicle sales in South Africa to decline by another 10% this year, on top of last year's 21,1% drop. A worst case scenario entailed a 13% – or worse – decline in sales.

“It is very difficult to predict what is going to happen.”

Niefer said he expected the economic climate to improve in South Africa once the election had passed and there was less uncertainty in the country, aided by another expected interest rate cut, and a more stable Zimbabwe.

“This will all help start the recovery process by the end of the year.”

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