Automotive industry in trouble: Ford SA warns South Africa to get its house in order or face the consequences
FORD South Africa president Neale Hill has sounded another warning to the government to get its house in order before the vehicle manufacturing industry faces total collapse.
“It’s not about to happen immediately, but I fear that investments from parent companies are likely to stop after 2028 if the current situation continues,” he said at the local launch of the Ford Puma in Cape Town on Wednesday night.
His comments follow a recent interview with Volkswagen Global CEO Thomas Schäfer where he said he was “very worried” about the future viability of its Gqeberha plant as a result of blackouts, rising labour costs and the county’s chaotic port delays and crumbling rail infrastructure.
“We are not a charity,” he said.
VW South Africa managing director Martina Biene said they had no plans to leave soon but she was concerned that once the current Polo lifespan ends in 2028, Europe was not looking to South Africa as an export hub as a result of the continent’s shift to EVs and more importantly the fact that there are many under-utilised plants in the EU.
Ford and Volkswagen are two of seven major manufacturers, the others being Toyota in Durban, Mercedes Benz in East London, BMW and Nissan in Rosslyn, Pretoria and Isuzu in Gqeberha.
Apart from the plant in Silverton, Pretoria, Ford also has their engine plant in Struandale on the outskirts of Gqeberha.
Nissan recently announced the retrenchment of up to 500 employees as a result of the phasing out of the NP 200 bakkie in March next year.
Hill said that if things continued as they were he was afraid the industry might go the same way as it did in Australia.
Ford pulled the plug in 2016 and by the end of 2017, Toyota and Holden had also stopped production in Australia as a result of, among other reasons, rising labour costs, small domestic consumption and expensive export costs to other markets.
The industry currently directly employs more than 120,000 people with many hundreds of thousands more in the local supply chain. It contributes between 5% and 6% of the country’s gross domestic market.
“We are not immune to global trends. Ultimately, we’re in the business of building and selling cars and if we become uncompetitive the industry will look to invest in a more stable climate and a more favourable business environment like Thailand, where Ford also has a plant.
“Economies of scale are vital, so should a manufacturer close down, everything gets affected. Glass, rubber, electrics, steel, etc, the domino effect throughout the supply chain would be catastrophic,” he said.
Like many other industries Ford has had to fly freight in as a result of the port backlogs that has seen more than 10,000 containers with R7 billion worth of products stranded outside three harbours.
“Our airfreight bill has skyrocketed. We can’t keep the plant standing still. We’re geared to produce more than 200 000 Rangers a year for local consumption and world-wide export and while the ships with the necessary parts are stranded outside harbour, we’ve had to duplicate the orders and fly the parts in.
“This makes it a logistical nightmare and of course there’s a huge financial implication as well.”
In a separate but related incident, JAC Motors have had to postpone their T9 bakkie launch as a result of similar issues.
The media received the announcement on Wednesday night from CEO Karl-Heinz Göbel saying: “We regret to announce the postponement of our T9 Press Launch.
“The Press Launch T9s departed Shanghai on September 27 with a typical four-week delivery timeline. Disappointingly, delays related to Transnet’s ports and inconsistent service from MSC have affected our launch.
“Our T9 launch units are onboard a vessel in Durban port, with the delivery date significantly surpassing our early December launch schedule.
“We sincerely apologise for any inconvenience and look forward to meeting you next year.”
BUSINESS REPORT