MERCEDES-BENZ South Africa has started talks to restructure its East London manufacturing plant that might include retrenching up to 700 workers, due to port and other challenges, including the weak economy.
The group, which employs about 3 000 staff at its East London assembly factory, said in a JSE regulatory notice yesterday that the Section 189 consultations would involve discussions regarding the restructuring of its manufacturing operations, transitioning from the current three-shift model to a two-shift model.
“Despite our best efforts, the current operating environment remains challenging, necessitating further action to ensure the long-term sustainability of our manufacturing operations,” the group said.
The East London plant is part of the group’s global production network for its C-Class model, and most of its vehicles – it produced 90 000 of them last year – are exported. The current C-Class is the sixth generation of the high-volume model, and has been manufactured at the plant since 2021.
In recent years, the automotive industry has had to deal with several challenges. These include deteriorating macroeconomic conditions that have led to relatively weak vehicle sales locally, prolonged port challenges, rising fuel and other prices, and a shift in buying to smaller, less expensive vehicles.
Last October the Motor Industry Staff Association warned there might be retrenchments in the auto industry, this after many dealerships had already been forced to close last year.
A spokesperson for labour union federation Numsa said they would be dealing with Mercedes-Benz SA’s potential job losses “in due course”. According to Numsa’s website, the auto assembly sector, traditionally a relatively stable industry in terms of employment, lost about 1000 jobs when General Motors quit South Africa in 2017.
In May, Mercedes-Benz SA sold 560 vehicles in the local market and exported 7500. Overall industry new car sales at 24 367 units fell by 11.2% against the same month a year before. Industry exports year-to-date to May, of 127 938 vehicles, was 12.1% lower than the same period a year before.
According to the naamsa | The Automotive Business Council, vehicle exports, on an industry basis, have declined due to the sluggish global economic recovery. An easing of the US interest rate, which could also result in other central banks commencing with interest rate cuts, would support South African vehicle exports.
“Overall consumer sentiment has suffered as a result of fluctuations in the exchange rate, subdued household income, rising fuel prices as well as increased energy and logistics costs,” Mercedes-Benz SA said in a statement yesterday.
It said that against these pressures, various measures had already been taken to address and improve the performance of its manufacturing operations, including cost-saving initiatives and efficiency improvements, but these were not enough.
Subject to the outcome of the consultation process, an estimated “700 employees at the East London manufacturing plant could potentially be affected by the retrenchments and the transition to a two-shift operating model,” the group said.
The consultation process could see the number of employees retrenched though the implementation of early retirement, voluntary severance, and natural attrition measures.
BUSINESS REPORT