For the second time in two weeks, a parts supplier is disrupting production at Honda Motor Co. (NYSE: HMC) plants in China. The company last week settled a strike at a transmission plant that had halted Honda’s Chinese production. The latest strike is at a plant that makes parts for the car’s exhaust system and has not yet had any effect on production. So far, other car makers with operations in China have not been affected. Volkswagen, General Motors, Ford Motor Co. (NYSE: F), and Toyota Motor Co. (NYSE: TM) all have plants in China.
Chinese workers have grown more demanding in the past few years as the country’s enormous economic success has contributed to rising prices and inflation. Workers who were once satisfied to have a job now want to earn enough to make the job worthwhile.
The only officially sanctioned trade union in China, the All China Federation of Trade Unions, is viewed by most workers as totally irrelevant and they have taken matters into their own hands. That works for the smaller groups, such as the 500 at Honda’s exhaust factory, but it does not work so well at huge plants like Foxconn, which employs some 300,000 workers. Foxconn, like Honda, recently promised to increase worker pay substantially following a rash of suicides that have been attributed to long hours and low pay. Foxconn manufactures electronics for companies including Apple Inc. (NASDAQ: APPL), Dell Inc. (NASDAQ: DELL), and Hewlett Packard Co. (NYSE: HPQ).
Volkswagen sold 1.4 million cars in China in 2009, and wants to grow that number to 2 million in 2010. The AP reports that China contributed about $837 million to the company’s profits last year. A shrewd union organizer might well target VW as the next target for increased wage demands.
In its recently settled strike, Honda agreed to pay its workers an additional $53.80/month, bringing the average monthly salary at its transmission plant to about $335, more than double the government-set minimum wage of about $135/month and Honda’s average salary in China of about $150/month. The new strike is likely to be settled for roughly the same amount
A report in a publication called the “China Labour Bulletin” notes that copycat labor actions are common in China. In manufacturers’ favor is the unorganized nature of the strikes and the very low starting point of the wages being paid. Even if wages rise substantially for every worker in China, the productivity of Chinese labor will still be a huge plus for the country.