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Honda’s Chinese Supplier Strikes Caught Carmaker by Surprise

Honda Lock (Guangdong) Co. factory in Zhongshan
A worker stands inside the Honda Lock (Guangdong) Co. factory in Zhongshan, Guangdong province, China. Photographer: Qilai Shen/Bloomberg

June 16 (Bloomberg) -- Honda Motor Co., grappling with the worst strikes to hit its 18-year-old Chinese manufacturing business, said it needs to improve communication with employees in the nation after the walkouts took the company by surprise.

“We couldn’t predict the strikes,” Yoshiyuki Kuroda, a spokesman for the Tokyo-based carmaker, said in a phone interview. “We need to have more opportunities for managers to listen to employees regularly.”

Honda, Japan’s second-biggest automaker, made the statement after strikes at two suppliers in China halted its car output in the nation for the first time and forced the company to raise wages. A third strike, at the Honda Lock (Guangdong) Co. parts factory in Zhongshan, Guangdong province, is suspended until June 18 while union leaders and management negotiate over pay.

There are no effective channels in China for workers and management to negotiate, said Geoffrey Crothall, a spokesman for the Hong Kong-based advocacy group China Labour Bulletin. Discussions between the parties are handled by government-linked union officials who aren’t elected by the workers, he said.

“Very often, you get an accumulation of complaints related to working conditions, the attitude of managers,” Crothall said. “Gradually, things build up and it just takes one incident to push the workers to strike.”

Honda is trying to set up a system that will enable a flow of communication from workers via managers to Japanese company officials and Honda’s management team, said Kuroda, the company spokesman. He declined to elaborate on the measures.

Suggestion Boxes

Honda rose 1.4 percent to 2,755 yen as of 1:36 p.m. in Tokyo trading, while the benchmark Nikkei 225 Stock Average advanced 2 percent.

Zhang Jun, a worker at Honda Lock’s Zhongshan factory, said suggestion boxes scattered around the plant are the only means of feedback from employees to their section leaders. Zhang sees his Japanese section leader daily but never speaks to him, because of language difficulties, he said.

“When we don’t know what the other party is thinking, confusion develops,” Zhang said in a phone interview.

Honda Lock, wholly owned by Honda Motor, operates the Zhongshan factory through a joint venture with the local township government. The plant supplies key systems, door handles and sensors for Honda’s Chinese car production.

Disruptions at overseas manufacturers including Honda and Taiwan’s Foxconn Technology Group reflect pressure for higher pay in China, where a shrinking pool of low-cost labor may boost consumption and inflation.

‘Tide of Higher Wages’

“There is a tide of higher wages, and anyone, any company getting in the way, will get knocked over,” said Edwin Merner, who oversees $3 billion as president of Atlantis Investment Research Corp. in Tokyo. Rising prices in China for housing and food “will mean continuing pressure on wages,” he said.

Workers attending a June 12 protest at the Zhongshan plant said they were inspired to take action after hearing that Honda raised salaries for striking employees at a parts plant in Foshan, Guangdong, last month.

Honda said May 31 it agreed to increase pay by 24 percent at the Foshan factory to end a walkout that shut production at all four of its Chinese car-assembly plants.

Foxconn, the assembler of Apple Inc.’s iPhones founded by Terry Gou, has raised salaries and hired counselors after at least 10 workers killed themselves at its China factories this year.

Worker Protests

Honda Lock employees attending the June 12 rally hissed and yelled at a factory official who addressed them with a bullhorn, asking them to enter the factory. The workers refused, shouting that the general manager should come out and talk to them instead.

Liu Shengqi, a former protest leader, said he saw cars near the factory with signs saying Honda Lock was hiring workers. The New York Times reported the company hired replacement workers to help restore operations. Honda Lock has declined to comment on the report.

Honda started manufacturing in China in 1992, beginning with motorcycles, spokesman Kuroda said. Toyota Motor Corp., Japan’s largest automaker, and Nissan Motor Co., the third-largest, also build cars in Guangdong.

“We are telling our suppliers in China to speak to the labor unions so that we have a smooth operation there,” Nissan’s Chief Operating Officer Toshiyuki Shiga said last week in Yokohama, where the company is based.

Toyota Talks

Toyota holds talks with its Chinese workers every year from April to May, said Paul Nolasco, a Tokyo-based spokesman for the company. Wages are rising, he said, declining to disclose the carmaker’s average pay in the country.

“Toyota tries to listen to workers in China, always, to prevent strikes,” Nolasco said.

Workers and management at Honda Lock’s Zhongshan plant have set a June 18 deadline to reach an agreement, said Liu, the former protest leader.

Hirotoshi Sato, a spokesman for Miyazaki, Japan-based Honda Lock, said the company “will listen to workers’ demands again and give an answer” at that time. He declined to say what the company has offered or what workers are demanding.

Liu and Zhang, the plant worker, said Honda Lock has proposed a 200 yuan monthly pay increase. Dayshift workers were offered an additional 3 yuan per day and night workers 14 yuan per shift, Liu said.

Employees, who began striking on June 9, have demanded a 72 percent raise to 1,600 yuan ($234) a month and higher overtime wages, Honda said on June 10. The factory employs about 1,400 people.

Car Production

About 90 percent of employees are unhappy with the 200 yuan offer, according to Zhang, the plant worker. If a deal isn’t reached this week, they will go back on strike, Liu said.

It’s too soon to say whether the disruptions at the plant may affect Honda’s car assembly in China, said Takayuki Fujii, a Beijing-based spokesman for Honda Motor. So far, the carmaker has had a sufficient stock of parts to keep factories running.

“Over the short term, there is very limited impact on Honda’s sales volume as they have inventories,” said Yankun Hou, an analyst at Nomura Holdings Inc. in Hong Kong.

Honda’s two car plants in Guangzhou, Guangdong, were shut yesterday and will remain closed today for a public holiday, said Tomoko Uchida, a spokeswoman for the company in Tokyo.

To contact the reporter on this story: Liza Lin in Singapore at

To contact the editor responsible for this story: Kae Inoue at

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