General Motors’ (GM) decision to cease production and sale of its vehicles in South Africa by the end of 2017 in order to focus on more profitable markets including the US and China is expected to lead to 589 job losses.
On Thursday, the Detroit-headquartered automaker announced that its light commercial vehicle manufacturing plant in Struandale, Port Elizabeth, would be sold to Japan-based Isuzu Motors as part of its preparation to pull out of South Africa.
Isuzu will also be taking over GM’s parts centre that manufactures trucks and commercial vehicles.
The sale of the Port Elizabeth-based plant means that GM will stop selling and manufacturing Chevrolet vehicles in South Africa. The prospects for GM’s Opel brand hangs in the balance as discussions with Opel’s new owner Peugeot-Citroën are still on-going.
The announcement came as a surprise to market watchers. Vehicle manufacturers who have pulled out of South Africa over the last two years include Citroën, Daihatsu and MG Cars.
Labour union fears of potential job losses following the disinvestment have now been confirmed as GM has started with the required section 189 process (the legal process of retrenchments).
The company said the number of employees (an estimated 589) to be affected is not yet final. “GM will enter into a consultation with employees and their representative unions to discuss all possible options going forward,” GM’s spokesperson Denise van Huyssteen told Moneyweb.
GM began producing Chevrolet vehicles in South Africa in 1926 but divested from the country in 1985. It then revived its operations in 1997. It employs more than 1 500 people in Port Elizabeth.
It’s unclear whether the predicted number of employees to be affected includes direct employees of the plant and companies along its value chain. The latter might swell the number of retrenchments well above 589. GM said it cannot provide any further details at this point until the consultation process with employees and labour unions has been completed.
The automotive industry is a bright spot for Port Elizabeth’s economy, the operations of GM and Volkswagen are the biggest employers in the coastal region.
The National Union of Metal Workers of South Africa (Numsa), whose members are GM employees, has accused the company of not consulting it about the sale of the plant. Numsa’s general secretary Irvin Jim said the union is consulting its lawyers about the job losses as it’s not certain that Isuzu would absorb all employees who work at GM’s operations.
“We are concerned that GM has already indicated that it might retrench workers… If these discussions are indeed taking place then it is likely that GM knows how many employees will be retained, and how many will be retrenched,” said Jim.
The Department of Trade and Industry said it’s not surprised by GM’s move given the pressures faced by the domestic automotive industry.
GM has found it difficult to compete in emerging markets as its vehicle sales are under pressure due to waning consumer confidence and economic uncertainty. It sold 40 867 vehicles (Opel, Chevrolet and Isuzu brands) in 2016, which Van Huyssteen said reflects the third consecutive year of industry sales decline in South Africa.
GM will also stop making cars in India.
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