The industry’s trade union, Solidarity on Thursday said it had received notification of planned retrenchments from 30 companies with about 10 percent of jobs in the sector have already been cut. “The sector is facing an extremely difficult period,” Solidarity said in a statement.

Hayes-Lemmerz, Robor Stainless, Guestro Automotive, IG Tooling, Formex and Dana Spicer are among companies planning on retrenching. Job cuts in the southern African motor sector appear inevitable, with even the unions now consumed with trying to cushion the blow of joblessness rather than fending off lay-offs.

The sector supplies vehicle components to the car manufacturing industry, which has been hammered after high interests reined in consumers’ willingness to spend on expensive durable goods.

damage

The extent of the damage was evident in January’s vehicle sales figures, which were released by the National Association of Automobile Manufacturers of South Africa this week. New vehicle sales in January 2009 dropped by 35.4 percent, compared to a 27.1 percent drop in December representing the worst January performance in eight years.
Interest rates in South Africa are expected to come down by between 250 to 300 basis points in 2009.

However, Solidarity said that the road to recovery will be strenuous. “Although car dealers now offer various specials in an effort to get sales to pick up again, consumers will still be very hesitant to buy new vehicles now, especially since economists warn that the economic downswing could still last about 14 months,” said Solidarity.

Unions’ organizing workers in the sector want employers to commit to social plans to cushion the blow of retrenchment for their members. The global economic recession has had a ripple effect as employers in the car component manufacturing sector have also threatened restructuring due to the current economic recession wave.

Of the 4,000 dealers in South Africa, 2,800 are franchised businesses and the remainder is used-car dealers. Dealers in the industry have been hit by very high stock levels. Whereas dealers previously had enough stock for about two months, they now have on average 120 to 180 days' stock.