[A-List] Honda to raise wages for striking China workers

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Honda to raise wages for striking China workers

Automotive News | May 31, 2010 - 8:39 am  EST
UPDATED:  5/31/10 12:46 p.m. ET
(Bloomberg) -- Honda Motor Co. will raise  workers' monthly wages after a
parts factory strike shut down almost all  Chinese production.

The workers will receive a 24 percent pay  increase to 1,910 yuan ($280
dollars) per month, Honda said in a faxed  statement today. Most workers have
accepted the offer, while talks  continue with those who are unsatisfied, the
automaker  said.

Production at all four Honda car factories in the country  will remain
suspended through at least Wednesday, with plans beyond that  date to
be decided
tomorrow, the company said in a separate statement.  Production of manual
transmissions at the parts plant resumed  today.

The maker of Accord and Civic cars shut down all four of its  auto assembly
plants in China last week after workers at the parts unit  walked out,
demanding a pay raise. The strike, the first to stop Honda's  production in the
country, may be reducing its output by as many as 3,000  vehicles daily,
analysts said.

“My guess is that it will take less  than a week to get production back at
full capacity once the strike is  resolved,” Tianshu Xin, managing director
at IHS Global Insight in  Shanghai, said prior to the settlement
announcement. Honda will likely add  shifts to make up the lost
production, he said.

The carmaker shut  two plants in Guangzhou, Guangdong province, on May 24
and factories in  Guangzhou and Wuhan, Hubei province, on Wednesday after
1,850 workers  making transmissions and engine parts at Honda Auto Parts
Manufacturing  Co. in Foshan, Guangdong, went on strike May 17.

Line  reopened

A line making manual transmissions at the parts plant  reopened today,
Yasuko Matsuura, a spokeswoman for Honda, said by phone.  Other
production lines
at the plant remained shut. The striking workers  had demanded monthly pay
be boosted to between 2,000 yuan ($293) and 2,500  yuan, Matsuura said
Thursday.

The original salary of about 1,500  yuan was already far above the legal
minimum wage of 920 yuan, Honda's  auto parts division said in a statement.

"We are currently trying  to convince those who continue to object to the
offer ... to return to  full operation as soon as possible," the company said.

Honda  produces about 3,000 vehicles a day in China, according to Koji
Endo, a  Tokyo-based analyst at Advanced Research Japan.

The affected  factories, joint ventures between Honda and its Chinese
partners, make  models including the Accord sedan and Civic compact and have
combined  annual capacity of 650,000 units.

China accounted for 17 percent of  Honda's global sales last year, and the
brand ranked fifth in China by  unit sales in April, according to J.D. Power
& Associates. Honda may  increase China sales 9 percent to 630,000 vehicles
this year, CEO Takanobu  Ito said last month.

The parts factory, a wholly owned Honda  subsidiary, started production in
2007 and makes transmissions for the  Accord, City Odyssey and Fit models,
according to the  company.

Production capacity

Honda plans to raise  production capacity in China by 28 percent to 830,000
vehicles a year by  the second half of 2012 and introduce two new models as
car demand grows  in the country, Ito said in Guangzhou on May 25.

Auto sales in  China may rise 17 percent to 16 million this year and annual
demand may  climb to more than 30 million, according to an official at the
State  Information Center.

The strike is a sign that automakers can expect  rising labor costs in
China, according to Yasuhiro Matsumoto, an analyst  at Shinsei
Securities Co. in
Tokyo. Trade unions and employers appear to  be reporting a growing number
of work stoppages in China, although there  are no official numbers,
according to the International Labor Organization  in Beijing.

“To enhance workers' payrolls, production costs will  rise,” said Tatsuya
Mizuno, director at Mizuno Credit Advisory in Tokyo,  adding Honda's image
in China may have been tarnished as a result of the  strike.

Elsewhere in China, more than 1,000 workers at a parts  factory near
Beijing that supplies South Korea's Hyundai Motor suspended  work for most of
Saturday to demand higher wages. They returned to work  after management
promised a pay rise, local media reported.

"There  was a little production disruption on both May 28 and 29, but it
has been  back to normal operations since May 30," a Hyundai spokesperson said
in an  e-mail from Seoul.

Reuters contributed to this  report.