LOWER COSTS

Johnson Controls relocates trim business to Lesotho to remain competitive

JOHNSON Controls, a global leader in automotive seating, overhead systems, floor consoles, door panels and instrument panels, relocated part of its operations in South Africa to Lesotho because of its need to achieve a more competitive manufacturing footprint.

This is the first time Johnson Controls has publicly explained the reasons for relocating its automotive trim operations to Lesotho last year. The relocation is believed to have resulted in the loss of hundreds of South African jobs.

Last year, the Automotive Leather Company also relocated from Rosslyn in Pretoria to Lesotho, while wiring harness producer Kromberg & Schubert relocated to Botswana.

These firms apparently relocated to take advantage of cheaper labour costs in those countries.

Lars Boelke, the communications manager for automotive seating in Europe and Africa for Johnson Controls, stressed in response to questions by Business Report that Johnson Controls had only relocated its trim business from South Africa to Lesotho.

Boelke said the company’s interiors and the just-in-time seat assembly businesses remained in South Africa.

“The decision to relocate the trim business to Lesotho was based on the need to achieve a more competitive manufacturing footprint (in Lesotho) to secure the company’s trim business in the southern African region,” he said.

Boelke said the relocated trim operations still supplied the company’s customers in South Africa and remained an integral part of the South African automotive industry.

He declined to quantify how many jobs had been lost in Johnson Controls’ South African-based operations because of the relocation or comment on what investment the company had made in Lesotho.

But he confirmed that Johnson Controls’ Lesotho plant operations employed about 650 people.

“Relocating business obviously always also means relocating jobs. In total we created more jobs in Lesotho than we had to terminate in South Africa,” he said.

Boelke confirmed that Johnson Controls’ interiors and seat assembly businesses in South Africa now provided employment to about 1 000 people.

However, Johnson Controls said in October in a statement, when the company celebrated 20 years of doing business in South Africa, that it estimated it would create 250 to 300 jobs when it started its operations in the country in 1994, but now employed more than 2 000 people and generated more than R2.5 billion in revenues.

The statement did not mention the relocation of the company’s trim operations.

Robert Houdet, the executive director of the National Association of Automobile Component and Allied Manufacturers, warned of the danger facing the automotive industry if South Africa continued to experience labour instability.

Houdet told Business Report that labour stability could still lead to companies disinvesting or relocating from the country.

“This is a warning to South Africa that should there be labour instability, countries that provide labour stability will become more attractive,” he said.