Implications of the Strike in Honda Auto Parts Manufacturing Co Ltd (CHAM)

The low wage regime in CHAM is not a single isolated example but the general condition in where CHAM is located. It is the result and the reproduction of the low-wage-based development model that Guangdong province has been relying on for achieving the fast speed economic development in the past 30 years.

CHAM is located in Shishan town of Nanhai district of Foshan city in Guangdong province. Foshan city was integrated into the administration of Guangzhou, the provincial city of Guangdong. Economic development in Foshan has been led by domestic small-medium-sized capital in the light and labour intensive industries producing consumables such as electrical appliances, furniture, ceramics, garments etc. The bottleneck was met after 2000 with overproduction in the domestic market and increasing foreign competition. Since 2002, Shishan town has been actively developing projects inviting foreign investment in the auto parts industry. This is part of the grand industrial re-structuring plan of Guangdong province launched in the 10th Five Year Plan (2001-2005) and the11th Five Year Plan (2006-2010). The industrial re-structuring plan, referred to allegorically as “Empty the cage and keep a new bird”, is to increase the capital and technological intensity of the secondary industry and development of the tertiary industry. Nine pillar industries, of which the auto industry is one of the cores, were selected for priority development to replace the low value added, polluting processing industries[NOTE1]. In 2005, the Guangdong government launched the “Development Plan of the Auto Industry of Guangdong Province 2005-2010” which exemplifies the goal of building the automobile manufacturing base in the provincial city of Guangzhou as the fourth largest auto belt in the country [NOTE2]. The assembly base in Guangzhou will be supported by an auto parts production belt in the Pearl River Delta area. The auto base should be developed on the basis of the leading auto enterprises in the province namely GAC, Honda, Toyota and Nissan. Immediate to the auto base in Guangzhou should auto parts manufacturing clusters be built in Foshan and Nansha city. The policy goal defined by the Guangzhou government is to increase the total industrial value of the Guangzhou auto industry to above 300 billion yuan and to expand the production of assembled car capacity to 1.3 million. Special focus is put on the development of the auto parts industry with the aim of reaching an industrial value of 80billion yuan by 2010 [NOTE3]. GAC, and via its partnerships with the Japanese auto MNCs, is the vehicle for upgrading the industrial basis, creating higher GDP and improving the quality of the labour structure of the province.

Auto Parts Clusters in Foshan city
Compared with other towns in Foshan city where the domestic capital plays key role in industrialization, the development of Shishan town has been lagging behind and the catch up was mainly driven by foreign investment mainly in the auto parts and related industries. Within 5 years, the economic value of Shishan town expanded three times from 16.6 billion yuan in 2004 to more than 45 billion yuan in 2009 and a GDP exceeding 40 billion yuan outpacing the counterpart towns in Foshan [NOTE4]. By 2009, Foshan city already has 300 auto parts companies of which 107 of them are joint ventures. Their cumulative investment amounts to US9.9 billion [NOTE5] and the industrial value created by the auto parts industry reached 22.8 billion yuan in 2009 [NOTE6]. Shishan town of Foshan city, where CHAM is located, has attracted more than 50 auto parts companies and the aggregate investment of these enterprises amounts to 2.42 billion yuan [NOTE7]. The first-tier suppliers of Honda and Toyota, many of them are affiliated companies of the two auto companies, have followed their customers and establish factories in Shishan town. Their investment has boosted the industrial value of the auto related sector by 26% to 12.1 billion yuan in 2009 [NOTE8].

Table Five: Japanese Auto Suppliers in Foshan City

   Source: Toyota Boshoku Foshan Co Ltd 2009 [NOTE9]

The auto parts suppliers listed in Table Five are the large scale major suppliers to the three Japanese auto companies Toyota, Honda and Nissan in Foshan city. The clustering of these companies has the effect of creating a sub-labour market of the auto parts sector in the local economy. In general, the working conditions of the auto parts workers in China are worse compared with the assembly workers. The annual salary of the production line workers averages around 10,000-20,000yuan ie between 800-1,600 yuan a month. Their wages are based on a lower than the legal minimum basic structure to be compensated mainly by income from long overtime work. Similar to the assembly workers, there is no formal wage incremental structure. Worse than their counterparts, annual bonuses linked to the company’s sales performance is not the rule except in a handful of rare cases. Other labour standards are irregular such as working hours, rest days, and social insurance provisions are not complying with the law. The use of interns in the auto parts sector is also on the rise and the interns are paid with 800-900 yuan a month without social insurance provisions [NOTE10]. Due to the intense competition in the automobile market, the auto parts sector in China becomes the buffer which absorbs the costs transferred by the assemblers. One reason for it is that the auto parts sector in China remains a de-skilled and labour intensive sector serving mainly in processing and machine operation. Labour is not the biggest cost factor in the production chain but the most flexible one. The fact that the low wage phenomenon is found not only in the irregular, small-sized domestic parts factories but in the first-tier joint ventures and the wholly foreign owned subsidiaries of the Japanese companies shows that low-cost-auto-parts is not a single case of abuse but the general rule for capital accumulation in the auto industry in China.

The economic and political value of the auto and auto parts sector to the local government enables these companies to create domination in the local labour market which reinforces further the general labour practices found within the sector. The auto parts clusters have at the same time created wage clusters and norms in the local region. It is not necessary for single employer and not likely for workers in a single company to make changes for better conditions. In the auto parts sector in Shishan town these norms include: minimal observation to the legal demands on wages, marginal violations of the labour laws in different ways and combinations, de-linking if not absence of a wage incremental system from the company’s profit level, and selective implementation of the government’s labour policies eg the central government’s promotion of collective wage negotiation at the workplace is not implemented in CHAM and the region. Without too much distinction between the types of capital, regular auto parts workers in Shishan town are receiving more or less the “market” wage of 1,000-1,300 yuan a month including the overtime and incentives; and the intern workers receiving not more than 1,000 yuan without social insurance provisions. These “market norms” are tolerated by the local government and the trade union as long as they meet the legal standard “nominally” [NOTE11].

It is only through the strikes that the market domination of the auto parts capital and the political domination of the government on the migrant labour regime are disrupted. The local township government pretends to be neutral insisting that Honda has not violated the labour law and wage rise is a voluntary issue between the workers and the management to be best resolved by the trade union. But the Guangdong government is eager to end the strike as soon as possible not by repressive means but positive intervention fully aware of the connection of the political and economic interests between the Japanese auto company and the government. This is displayed in the high profile intervention of Zeng Qinghong during the strike and the negotiation, himself being the General Manager of GAC and a member of the People’s Council.

Implications of the Strike in CHAM

The particular construction of the production system of Honda, the domination of the auto and related industry in the local economy and the migrant labour regime in the local context of China combines to structure the remuneration and employment of CHAM. Under such circumstances, the law ie the minimum wage legislation is left as the only tool for wage increment for the workers. When that is not respected, as in the case of CHAM, the workers resorted to strike. In fact the strike in CHAM that took place in May was preceded by strikes that have been taking place since 2009 in other affiliated companies and suppliers of Honda found in the other auto parts hubs of Guangzhou, Foshan and Zhongshan cities [NOTE12].

Strikes were reported in:

2009
June     Guangzhou H-One Auto Parts (广州爱机汽车配件有限公司) (chassis)
July      Wuhan Wanshun Auto Parts (武汉丸顺汽车配件有限公司)
July     Guangzhou Moriroku Technology Co. Ltd (武汉森六塑件有限公司)
July     Wuhan Auto Parts Alliance Co Ltd (武汉艾帕克汽车配件有限公司)

2010
Jan           F.tech Zhongshan Inc. Location (中山伟福科技有限公司) (dies, machinery and equipment)
Jan           Gensho Shibusawa Logistics (Guangzhou) Co.,Ltd. (原尚物流)
Jan           Akebono Corporation (Guangzhou) (广州曙光制动器有限公司) (drum brakes and processes, disk brakes)
Feb          China FCC Foshan Co Ltd (佛山富士离合器有限公司) (clutches)
Feb          Yurozu Bao Automative Co Ltd (广州万宝井汽车配件有限公司) (auto parts, machines parts)
March      Guangzhou Linjun Co Ltd (广州林骏汽车内饰件有限公司) (car decoration)
March      Guangzhou Automobile Industry Group (GAIG) (广州阿尔法内内饰公司) (car decoration)
March      Guangzhou Xin Guang Metal Co. Ltd (广州星光配件) (car decoration)
March      Guangzhou Hexi Auto Parts (广州河西配件)
May         CHAM (佛山本田零部件)

Source: various from the internet

Strikes Regulating wages

The strike in CHAM is certainly having the most critical impact amongst the labour unrests in the auto industry recently. The strike bears with it new and critical features unseen in the previous labour actions taken by the migrant workers [NOTE13]. Yet, similar to the other migrant actions, the CHAM case did not demonstrate tight coordination and organization. What is more important is the demonstration of a more mature and politicized labour consciousness of the migrant workers. This is shown in terms of the CHAM workers’ awareness of their particular position in the economic production of the company and the local region; the legitimate position they took in crying for the reform of the trade union, and the bitter challenge they posed against the wage gap between the Chinese workers and Japanese expatriates. Dialectically the strike was political conscientisation to the migrant workers in CHAM since the issue of trade union had never occurred to them until the time came and they found that the trade union could not represent their interests in the communications with the management [NOTE14]. All these are issues of deep sense pointing to the capital accumulation and exploitation of the migrant labour behind the FDI-led and GDP-indexed development model that Guangdong province has based itself on. Since the outbreak of the strike in June, a chain reaction was kindled in the auto sector within and outside Guangdong province. Most of the strikes that followed afterwards took place in the Japanese companies and all of them were demanding for wage increase, fair share of workers’ wages in the corporate’s profit, and in some cases, reform of the plant trade union all of which are demands inspired by the strike in CHAM (Table Six). In most of these cases the economic demands of the workers are met. Furthermore, the demonstration effect of the strike started on 17 May in CHAM has up to now led to labour unrest in other sectors in the Pearl River Delta area resulting in the pay rise in more than a hundred companies in the region the most successful case being one where the wage level rose by 800 yuan [NOTE15].

The strike marks a significant turn in the spontaneous labour struggles of migrant workers in China from defensive to offensive. Labour legislations is not the only means, as intended by the government in the transiting to market economy, to mediate labour standards and rewards. The demand of labour is fair and just wages not legal minimum wages.

Table Six: Strikes in Honda and Toyota subsidiaries and affiliated companies in China (June and July 2010)

Source: by author from various news reports

Freedom of association in China

The repercussions of the CHAM strike demonstrate the capacity of the migrant workers to change the power relation on the shopfloor. More Japanese companies conceded and the government intervened proactively. More importantly, the strike in CHAM is the most articulated one of the migrant workers’ demanding for the reform of the trade union. The workers’ challenge to the value of the trade union indeed marks a real politicization of freedom of association which has never been an issue in the struggles of the migrant workers before. The strike and the election of the negotiation delegation confront the ‘natural right’ of representation and collective bargaining of the ACFTU. The representation and bargaining position of the trade union is granted by the administrative power of the state rather than gained from amongst its members. Collective bargaining in its reduced form becomes the collective wage consultation which was first raised in 2005 by the Hu-Wen government to promote the harmonious society. The assigned task to the ACFTU was reported to have results only in the nominal. In 2008 the Guangdong ACFTU proposed the Ordinance on Democratic Management of Enterprises to the provincial people’s council and was passed in 2008. Yet, it was regretfully demonstrated in the strike actions taken by the migrant workers that the administrative authority granted by the state to the trade union does not have impact on the working conditions of the migrant workers on the shopfloor.

As a reaction to the recent strikes, the Guangdong ACFTU is quickening the process of “professionalization of trade union officers” to improve the quality of the trade union’s work at the plant level. The provincial union has spared a special project fund of 10 million yuan to recruit and place nearly a thousand full-time officers staffed by the union in the plant level branches to ensure that these plant level unions are performing their duties regarding labour rights and disputes [NOTE16]. The move for professionalization of the trade union officers of the Guangdong ACFTU is nevertheless an ends-oriented measure that is rationalized by the absence of conflict of interests if in case the union officers are staffed by the supervisory union rather than the employer. Yet, it is still not a measure that addresses the demand for democratic election of, by and for workers that the workers in CHAM and other strikes were crying for. The provincial union further proclaims to test case on the election of the chair of plant unions in Nanhai district admitting that the elections of union officers in the foreign enterprises in Guangdong in the past were actually administrative appointments rather than real elections. It would of course be much better if these projects of the ACFTU for plant union election are developed in an open process, through open consultation and with the participation of the migrant workers rather than top-down engineerings. The next challenge in the struggle for the democratization of the union is as much a challenge to the ACFTU as the CHAM workers and their representatives in the strike and negotiation. These representatives are not protected by law and are easily subject to the pressure of the management and the government. Until the next election of the CHAM union, favourable conditions to freedom of association must be guaranteed by Honda and the government to enable the workers to freely choose to associate with the ACFTU through a truly democratic, open and fair process.

IHLO

July 2010

For more articles and appendix see :

A Political Economic Analysis of the Strike in Honda and the auto parts industry in China

Appendix One : Chronology of Honda Workers’ Strike in CHAM

Appendix Two: The Automobile Strategy of the Guangdong Government and the Guangdong Automobile Group

Appendix Three: Policies of the Chinese Government on the Automobile Industry

Open Letter from the Delegation of Representatives of the Honda Strike Workers