Honda Motor Co., Japan’s second-biggest automaker, may not be able to resume full production today at a parts factory in China that remains mostly closed due to striking workers, the company said.

“Negotiations are not going very smoothly,” Yoshiyuki Kuroda, a Tokyo-based spokesman for the company, said yesterday by phone. Talks between management and workers are ongoing and it’s unclear when the striking employees may return, Zhu Linjie, a Beijing-based spokesman for Honda, said earlier yesterday.
The maker of Accord and Civic cars shut down all four of its auto assembly plants in China last week after workers at a parts unit walked out, demanding a pay raise. The strike, the first to stop Honda’s production in the country, may be reducing its output by as many as 3,000 vehicles daily, according to analysts.
“If the strike ends in a short period of a few days, damage is light,” said Tatsuya Mizuno, director at Mizuno Credit Advisory in Tokyo. Still, Honda’s image in China may be tarnished, he said. Honda fell 0.3 percent to close at 2,770 yen in Tokyo trading today, while the benchmark Nikkei 225 Stock Average rose 0.1 percent.
The carmaker shut two plants in Guangzhou, Guangdong province, on May 24 and factories in Guangzhou and Wuhan, Hubei province, on May 26 after 1,850 workers making transmissions and engine parts at Honda Auto Parts Manufacturing Co. in Foshan, Guangdong, went on strike May 17. An export-only plant in Guangzhou was set to make 50 Jazz compact cars today using parts inventory, according to the company.
A line making manual transmissions at the parts plant reopened today, Yasuko Matsuura, a spokeswoman for Honda, said by phone. She declined to say whether the carmaker had reached an agreement with the workers on the line or to give other details. Other production lines at the plant remained shut.
The striking workers are demanding monthly pay be boosted to between 2,000 yuan ($293) and 2,500 yuan, from 1,500 yuan, Matsuura said on May 27. Honda produces about 3,000 vehicles a day in China, according to Koji Endo, a Tokyo-based analyst at Advanced Research Japan.
“It’s difficult to say, but my guess is that it will take less than a week to get production back at full capacity once the strike is resolved,” said Tianshu Xin, managing director at IHS Global Insight in Shanghai. Honda will likely add shifts to make up the lost production, he said.
The affected factories, joint ventures between Honda and its Chinese partners, make models including the Accord sedan and Civic compact and have combined annual capacity of 650,000 units.
China accounted for 17 percent of Honda’s global sales last year, and the brand ranked fifth in China by unit sales in April, according to J.D. Power & Associates. Honda may increase China sales 9 percent to 630,000 vehicles this year, Chief Executive Officer Takanobu Ito said last month.
The parts factory, a wholly owned Honda subsidiary, started production in 2007 and makes transmissions for the Accord, City Odyssey and Fit models, according to the company.
Honda plans to raise production capacity in China by 28 percent to 830,000 vehicles a year by the second half of 2012 and introduce two new models as car demand grows in the country, Ito said in Guangzhou on May 25.
Auto sales in China may rise 17 percent to 16 million this year and annual demand may climb to more than 30 million, according to an official at the State Information Center.
The strike is a sign that automakers can expect rising labor costs in China, according to Yasuhiro Matsumoto, an analyst at Shinsei Securities Co. in Tokyo. Trade unions and employers appear to be reporting a growing number of work stoppages in China, although there are no official numbers, according to the International Labor Organization in Beijing.
(Source: Bloomberg)