No bail-out needed

Lay­offs con­tinue and plants go idle, but there are bright spots

Finweek English Edition - - Business Strategy -

VOLK­SWA­GEN SOUTH AFRICA fol­lowed sev­eral other lo­cal ve­hi­cle man­u­fac­tur­ers and opted for a vol­un­tary re­trench­ment pro­gramme ear­lier this year. The com­pany now em­ploys 5 100 work­ers, down from 5 500 pre­vi­ously.

This is in line with in­dus­try trends: Ac­cord­ing to Naamsa’s quar­terly re­port em­ploy­ment lev­els re­mained un­der pres­sure dur­ing the first quar­ter of 2009 with net in­dus­try em­ploy­ment fall­ing by 2 571 jobs as a re­sult of down­siz­ing at most as­sem­bly op­er­a­tions. Dur­ing all of 2008, 2 566 jobs were shed, sug­gest­ing con­di­tions are wors­en­ing. The in­dus­try em­ploys 33 300 work­ers in to­tal.

Ca­pac­ity util­i­sa­tion of only 63% in the in­dus­try is at multi-year lows. De­spite this, cap­i­tal ex­pen­di­ture for 2009 is es­ti­mated at R3,6bn, up on last year. It’s not all neg­a­tive how­ever. South Africa’s share of global pro­duc­tion jumped over 10% in 2008, and the in­dus­try’s share of lo­cal GDP is up to 7,3% from 6,8% in 2007.

Anec­do­tal ev­i­dence also points to some bright spots. Volk­swa­gen, to­gether with other SA man­u­fac­tur­ers, planned to idle its plant as lo­cal de­mand and ex­ports fell. “We did in fact pen­cil in a two-week shut­down over the Easter pe­riod, but thanks to de­mand for the Polo in Ger­many, we pro­duced through­out April,” says Bill Stephens, GM for com­mu­ni­ca­tions at VW SA.

The de­mand for the Polo is thanks to a scrap­ping al­lowance in­tro­duced in Ger­many

Golf VI

Lo­cal­i­sa­tion drive.

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