Labour relations in China are under scrutiny right now. There’s been that sad spate of suicides at consumer electronics maker Foxconn, which churns out household-name branded products and just gave workers a 30% pay rise, and there’s been Honda.
Signs are that Chinese workers have had enough of long hours, often hundreds of miles from home and low pay and are starting to get a bit militant. Strikes may well be illegal but interns, even less well remunerated, managed to stop output of Honda engines and transmissions, leading to a halt in car production. Things have got a bit nasty over the last couple of weeks, with government-backed union goons resorting to a bit of violence here and there to try and ‘persuade’ the miscreants back on the job.
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Today, Wednesday, Honda is saying officially that all is again sweetness and light but company sources in Japan suggest otherwise and the interns are saying, no, a 24% wage hike is a start but we want more – a CNY800 (US$117.2) monthly salary hike (the company offered CNY477), an annual salary increase of no less than 15%, year-end bonuses no less than the preceding year’s, salaries during the strike period and a new chairman to lead a restructured union. Honda has until Friday to respond or out some of ’em will go again.
All this poses a conundrum for automakers like Honda, doing well with JVs with local companies and with bold expansion plans in place. Huge wage hikes will place even more cost pressure in a market starting to show signs of slowing growth, with vehicle stocks growing and an increasing possibility of a price war breaking out.
On top of that risk, China has a less than stellar human rights record and any heavy handedness to break a strike, or a stubborn refusal to pay a ‘living wage’ could provoke a consumer backlash in the west. Remember Nike in Vietnam?
The next few days will be telling. Hopefully, there’ll be a little flexibility on both sides and China will ultimately come up with a mechanism to fairly compensate its labour and avoid the annual confrontation that accompanies wage negotiations in Korea.
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