BMW to Halt South Africa Expansion Plans After Strikes

Bayerische Motoren Werke AG (BMW), the world’s largest maker of luxury vehicles, will stop expansion in South Africa following labor strikes that have disrupted the auto industry for the past two months.

“Any plans to expand our plant or our capacity further have been put indefinitely on hold,” BMW spokesman Guy Kilfoil said in an interview today. “Future decisions are being made where South Africa would have been in the running. Based on the current environment we’re definitely not. You could say things have changed.”

South African plants belonging to carmakers including BMW, Toyota Motor Corp. (7203), and Volkswagen AG (VOW) were shut for three weeks in August and September after workers went on strike to demand higher pay. The labor dispute cost the industry as much as 700 million rand ($69.6 million) a day, according to the Automobile Manufacturers Employers Association. About 72,000 car industry workers from fuel stations to car components also went on strike, causing further losses.

While BMW is maintaining its long-term plans for Africa’s largest economy, the Munich, Germany-based automaker’s internal perception of the country has changed following a wave of strikes this year from mining to aviation companies.

“From our perspective we think the country is at a fairly major socio-political crossroads,” Kilfoil said. “South Africa is becoming less globally competitive in terms of wages, energy cost, water cost. All of those things are making South Africa a less attractive destination for foreign investment.”

South African vehicle sales fell for a second month in September and exports dropped 75 percent as strikes hit carmakers’ operations.

Sales fell 1.5 percent from a year earlier to 54,281, the Pretoria-based National Association of Automobile Manufacturers of South Africa said in an e-mailed statement on Oct. 1.

To contact the reporter on this story: Christopher Spillane in Johannesburg at cspillane3@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.