South African Auto Strike Ends

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Three weeks after a labor union strike disrupted automobile production in South Africa, the workers ended the strike yesterday, according to Bloomberg. Major car manufacturers like Ford Motor Co. (F), General Motors Co. (GM), Toyota Motor Corp. (TM), Nissan Motor Co. Ltd. (NSANY) and Bayerische Motoren Werke AG (BMW) were affected by the strike that began on Aug 19.

The strike was called in demand for a wage hike. The National Union of Metalworkers of South Africa (:NUMSA) wanted a 14% hike in wages while automakers were only offering 10%. However, the matter has been settled with 11.5%, 10% and 10% hikes in 2013, 2014 and 2015, respectively.

However, while the carworkers are resuming work, gas station attendants, panelbeaters, car and spare parts dealers and fitment workshops went on strike today, which should adversely affect the industry. The three-week strike led to significant losses for automobile manufacturers as well as the South African economy. While Toyota lost over 700 cars daily, BMW lost almost 350 sedans. Nissan’s daily output of almost 250 units in South Africa was also affected.

Consequently, the South African economy will be affected significantly as the automobile sector contributes 6%–7% of the GDP and 12% of the country’s exports. Both foreign direct investment and economic growth will be hampered. In fact the African Rand has already hit 4-year lows due to the impact of the strike. This will add to the problems of the South African economy, which has already received a severe blow owing to the year-long strikes in the mining sector.

Nissan currently carries a Zacks Rank #1 (Strong Buy), while Ford and General Motors carry a Zacks Rank #3 (Hold).

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