Recruiter says the unions’ behaviour will take its toll

14th March 2003 By: marisa rodrigues

Although the automotive industry continues to grow and attract much-needed foreign investment into South Africa, it has to face the fact that there is growing international competition, points out Leaders Unlimited partner Chris van Tonder.

Van Tonder says he has been involved in recruiting for the local automotive industry for almost thirty years and has been responsible for headhunting more top executives at automotive firms that any other executive recruiter in South Africa, counting several CEOs and MDs among his clients.

“South Africa needs to take urgent action to ensure that it can provide automotive companies with a fair return on their investment capital so as to continue its success in the export market,” he observes.

As most of the major manufacturers decide on a model-by-model basis where they will be manufacturing the vehicles, plants compete for manufacturing rights, and reliability, cost, quality and distance to market are all important considerations in deciding which country will be the best option for new export models.

South Africa is facing increased competition from countries in Eastern Europe and other emer-ging nations in Asia and Latin and South America for every investment dollar.

Van Tonder believes that reliability is an area that South Africa needs to pay close attention to because – if the country cannot be trusted to fit into the overall supply plan, parent companies will favour other locations for manufacture.

“In a globalised industry, such as the automotive industry, consumers do not know or care where their vehicle is being manufactured, all they care about is that it is there on time.

“Therefore, South Africa cannot afford to have strikes, which often result in delays, meaning the car does not arrive at the customer on time,” indicates Van Tonder.

A positive development for South Africa has been the improved telecommunications network, which has allowed local plants to integrate into worldwide manufacturing plans.

This enables customers anywhere in the world to establish immediately how far down the line their vehicle is.

Van Tonder also believes that the union militancy in South Africa and constant demands by unions for higher wages, without offering improved productivity in return, will take its toll on the industry.

According to Van Tonder, a recent survey has shown that autoworkers in South Africa are earning more than their counterparts in Mexico, Brazil and in some countries of Eastern Europe.

“There seems to be a lack of understanding among union officials of just how cutthroat the global automotive industry is, and how relatively small the margins are on which these manufacturers have to survive,” notes Van Tonder.

“Most of the manufacturers have spent a fair amount of money trying to educate the unions on the key aspects of quality, reliability and cost, which will hopefully be of assistance,” he continues.

The cost of labour is also increasing as a result of the high number of skilled workers in the automotive industry lost to the HIV-Aids pandemic.

“We are losing so many skilled workers to Aids, especially in the coastal regions, and the industry is struggling to train enough replacements.

“Unless this trend is reversed in the near future, the industry will suffer the consequences,” indicates Van Tonder.

Although many original-equipment manufacturers have skills programmes in place to gain the necessary skilled labour, there is still a shortage of skills due to the lack of foreign presence in this country for many years, and a fairly inactive industry until 1995.

While South Africa has always been seen as a low-cost manufacturing centre, there are other countries, such as China, that are becoming more involved in the automotive industry that are able to compete with South Africa in this regard.

The current rand volatility is also making it difficult for original-equipment manufacturers (OEMs) in this country to accurately establish their costs and plan their investment.

The Motor Industry Development Plan has undoubtedly been a major factor contri-buting to the success of the export programme and the extension of it has provided OEMs with a ten-year horizon, enabling them to plan their investment better.

“With a ten-year horizon, parent companies are given the confidence that conditions will not change suddenly.

“However, the recent changes to the programme have meant OEMs will now have to run faster to realise the same benefits,” remarks Van Tonder.

South Africa has to ensure that its reliability, cost and quality factors are in place, as geographically it is at a disadvantage being a fair distance from the main world markets.

South Africa has no choice but to look to these markets, as the local market is small and exports into Africa are few.

Despite his concerns, Van Tonder believes the outlook for the local automotive industry is good.

“Certainly it has been a slow build-up to where we are now, but it has nonetheless been a solid build-up.

“The key issue is for South Africa’s supply to be reliable and, if that can be assured, the industry should continue to grow,” concludes Van Tonder.