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Honda offers strikers in China 24% pay boost
Published on: 2010-06-01
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BEIJING—Honda Motor Co. said it has offered striking workers who have paralyzed its car-production lines in China a 24% increase in pay and benefits, a significant concession that highlights the new challenge from organized labor facing foreign investors on the world's factory floors.

Strikers were pushing for a 53% boost to bring their total compensation package to 2,300 yuan (US$337) a month, according to two strike leaders who were fired by Honda after the walkout began May 17 at a plant in southern Guangdong province, China's export powerhouse.

Nevertheless, Beijing-based Honda spokesman Takayuki Fujii said that "a majority" of the 1,900 workers at Honda Auto Parts Manufacturing Co. accepted the company's offer and returned to work Monday afternoon, allowing the company to "partially restart production" of transmissions, or engine gears. He said several dozen workers have rejected the offer and are trying to disrupt work at the factory.

Honda now hopes to restart operations at all four of the Chinese joint-venture final-assembly plants that it was forced to shut down last week because of the lack of a key component.

Tan Guocheng, one of the strike leaders, said workers took action because they couldn't support themselves on Honda's basic pay. "We needed to pay rent, eat and take care of other expenses," said Mr. Tan, a 24-year-old worker from Hunan province. Mr. Tan was fired along with another strike leader on May 22 for violating the plant's in-house work and contract rules, said Mr. Fujii, who declined to elaborate.

"I am in Guangzhou now. I don't want to work in a factory any more. I plan to go home," Mr. Tan said in a telephone interview Monday. "I hope the government and companies will pay more attention to front-line workers."

Honda's troubles have rocked some of its calculations about labor practices, which have significantly lowered its costs and made China a highly attractive place to produce cars.

The car maker has been able to hire graduates of nearby high schools and vocational schools as trainees, paying them less than the minimum wage set by the city of Foshan for qualified workers, which currently stands at 920 yuan a month. Such trainees account for a third of the plant's 1,900 workers, according to the company. It wasn't clear what kind of concession worker-trainees, who went on strike along with regular full-time workers, received.

Compared with Japan and the U.S., where auto-plant workers tend to have only a high-school education or less, Honda's workers are well educated, with as many as two years of post-high-school technical education.

In China, auto makers like Honda also enjoy relative flexibility in setting production-line operations, especially in contrast to the U.S., where job descriptions of assembly workers are more rigorous. According to a senior Honda executive, such conditions have allowed Honda to boost efficiency in a way that produced cars of equal or higher quality compared with those produced in Japan. The quality of Honda Jazz subcompact cars produced in Guangzhou for export to Europe, the executive said, is "at least on par with that of the same car manufactured in Japan, if not better in some cases."

Labor experts say Honda's concession will put pressure on manufacturers across China, both foreign and domestic.

"China's economy is recovering and we see labor shortages again in places like Guangdong, and I think the workers are more emboldened again to press the issue," said Mary Gallagher, a professor of political science at the University of Michigan, Ann Arbor, who is an authority on labor issues in China.

Ms. Gallagher said that large, well-organized strikes in China have been occurring since the 1990s.

Still, she said, one clear change in recent years is that there is "much more awareness among workers in China" about their rights since a new labor-contract law took effect in 2008. "There's definitely a sense among workers that there is a new law in place that is protective of you, and you have the right to go use those laws."

For Honda, it is critical to have smooth operations in China, which overtook the U.S. last year to become the world's largest auto market. China now accounts for nearly 20% of Honda's global sales, according to J.D. Power and Associates.

The strike has exposed unexpected vulnerabilities in Honda's China supply chain. Because of the relative absence of labor unrest in China, Honda makes do with only one source of transmissions there, the Foshan factory that supplies roughly 80% of demand, according to Mr. Fujii. The rest are brought in from Japan. Typically, Honda insists on at least two suppliers of parts, partly to protect against any industrial action that might cripple production. Honda currently has the capacity to produce 650,000 cars a year in China.

Labor experts say that the Chinese central government and local authorities have been in a quandary over how to respond to the strike at Honda. On the one hand, higher wages ensure that Guangdong remains an attractive destination for migrant workers. But authorities are also trying to maintain the province's allure for foreign and domestic Chinese manufacturers. "This is a difficult balancing act" for local governments, Ms. Gallagher said.

Honda's pay increase mirrors an increase offered to workers at a nearby factory in Shenzhen run by Taiwan-based Hon Hai Precision Industry Co., although the circumstances are very different. Ten workers have jumped to their deaths this year at the Hon Hai plant, and three more have been injured in suicide attempts. Some analysts have linked those events in part to oppressive working conditions. Hon Hai management offered workers a 20% pay increase on average, but it insisted the boost was aimed at addressing concerns about worker shortages.

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