DaimlerChrysler threatens to cancel S African export deal By James Lamont in Johannesburg Published: August 14 2001 18:21GMT | Last Updated: August 14 2001 20:55GMT
DaimlerChrysler, the German car manufacturer, on Tuesday threatened to cancel a large export contract held by its South African plant unless striking assembly workers returned to work.
In an open letter to employees, Christoph Kopke the company's regional chairman, warned that a strike over wages across the motor industry could force management to transfer production of Mercedes Benz C-Class models to Germany.
A decision by DaimlerChrysler, South Africa's largest foreign investor, to withdraw an export contract for 17,000 vehicles a year would deal a severe blow to South Africa's efforts to entice foreign investment and deepen fears of an uncompetitive and fractious workforce.
The export contract was agreed with great fanfare in 1999 and required a R1.5bn ($182m) investment. It served as a beacon for South Africa's foreign investment prospects and a vote of confidence in the ability of local workers to produce high quality engineering for international markets.
The DaimlerChrysler plant in East London, one of the country's poorest provinces, employs 4,000 workers and produces about 170 right-hand drive C-Class cars a day. About 80 per cent of production is exported to the UK, Japan and Australia. The plant also produces Colt vans and Mercedes Benz commercial vehicles.
Earlier, this year DaimlerChrysler became the first large corporate entity in South Africa to offer comprehensive medical care for HIV/Aids sufferers, estimated to account for 20 per cent of its workforce.
"Our survival is at risk. Should the strike carry on much longer, DaimlerChrysler will not be able to meet this year's production target. Even with working overtime for the rest of the year, lost production will not be recovered," said Mr Kopke.
"Consideration may soon have to be given to transferring production from South Africa to Germany. This production would forever be lost to us, our suppliers and South Africa."
The National Union of Metal Workers (Numsa) took its 22,000 members in the motor industry, one of the country's leading foreign currency earners, on strike at the beginning of last week after annual wage negotiations became deadlocked. Other companies affected are BMW, Volkswagen, Delta, Ford and Nissan.
Employers have offered a wage rise of 7.5 per cent within a three-year agreement, but the union is holding out 12 per cent in a two-year deal.