Ford, Toyota halt some South African output due to strike

CAPE TOWN (Reuters) - U.S. motor company Ford has suspended production at one of its South African plants and Japanese car-maker Toyota <7203.T> plans to follow suit as a manufacturing workers' strike hits suppliers of car components.

The two-week-old strike by 220,000 NUMSA union members, who are seeking 12-15 percent annual increases, follows on the heels of a five-month strike in the platinum sector that stunted economic growth and export earnings.

The manufacturing strike also forced General Motors to close its assembly plant in the southern city of Port Elizabeth over a week ago, despite efforts by Labour Minister Mildred Oliphant to mediate between the union and employees.

"Production at our Silverton assembly plant has been temporarily suspended due to the strike," Ford spokeswoman Alicia Chetty said on Monday, adding that only the company's Pretoria plant was affected and its other plant in Port Elizabeth was operating normally.

Toyota said it will halt some production from Tuesday because of supply chain problems related to the stoppage.

"Toyota will close two production lines from Tuesday at our Durban plant," spokeswoman Mary Willemse said.

Mercedes Benz said supply lines to its assembly factory were reaching "critical" stress levels and an industry body warned more car-makers could be forced to halt production.

"Things are beyond dire. We have exhausted stockpiles we managed to build up in the months leading up to this strike and I expect more companies to halt production should the strike continue," Ken Manners, vice president of the auto component manufacturing body NAACAM told Reuters.

Production at BMW , VW and Nissan <7201.T> was normal, although company officials said on Monday they were monitoring the situation closely.

Those affected include construction companies Murray & Roberts and Aveng Ltd , which are working on the construction of two major power plants for state power utility Eskom.

NUMSA rejected the latest pay offer from employers in the steel and engineering sector on Sunday and called on its striking members to intensify the industrial action.

Employers have offered pay rises of 10 percent in the first year, 9.5 percent in the second year and 9 percent in the third year. But unions also have grievances about the role of labour brokers in industry and do not want to be bound to a multi-year agreement, preferring a one-year deal instead.

NUMSA met the main employer body, Steel and Engineering Industries of South Africa (SEIFSA), on Monday to formally reject the offer.

Spokesman Castro Ngobese said SEIFSA - which said on Friday it would take its latest offer off the table if it is rejected - has taken his union's latest demand to its members for consideration.

"Meanwhile the strike continues indefinitely," Ngobese said, adding union leaders were due to meet on Tuesday to consider ways to intensify the strike.

Smaller union United Association of South Africa (UASA), which represents about 20,000 workers in the sector, said it was awaiting a response from employers on questions about the same offer.

"We expect an answer by tomorrow and that will put us in a position to say if we accept or reject it but chances of accepting look good," said Johan van Niekerk, UASA spokesman.

The strike, which has hit the supply of beverage cans made by packaging firm Nampak has damaged wider investor sentiment in Africa's most advanced economy, which is teetering on the brink of recession after a first-quarter contraction caused in part by the platinum strike.

Ratings agency Standard & Poor's cut South Africa's credit rating last month while Fitch put it on negative watch, both citing poor growth prospects mainly because of strikes.

The Reserve Bank's monetary policy committee meets on Thursday to consider an interest rate hike amid growth concerns after the central bank raised it by 50 basis points to 5.50 percent in January, the first increase in almost six years.

"If growth is the main concern, governor (Gill) Marcus may be unwilling to raise the repo rate unless the strike is resolved soon," Francois Stofberg, an economist at Efficient Group said.

Analysts have long singled out South Africa's volatile labour environment as a deterrent to investment.

Separately, about 200 workers downed tools at unlisted Cape Town-based wine maker DGB, demanding a 10 percent wage hike, union leaders said. DGB, which makes some well-known brands, is offering a 7 percent raise.

(Additional reporting by Tiisetso Motsoeneng in Johannesburg; Writing by Olivia Kumwenda-Mthambo; Editing by Ruth Pitchford and Hugh Lawson)

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