South Africa needed to be concerned about its relatively higher costs, including labour costs, compared with its global competitors and needed to do something to compensate for this disadvantage, Joe Hinrichs, the president of Ford Asia Pacific and Africa, said last week.
From an industry perspective, the automotive industry had to be able to compete over the long term with everyone else globally, Hinrichs said ahead of the Johannesburg International Motor Show.
But Hinrichs stressed that he was talking about holistic competitiveness, including logistics costs, government support and labour costs, rather than one cost sub-component.
He said this meant increased productivity, improved quality and more government engagement in the industry.
“This is something that has to be looked at and we have to be very business-minded about it. We are making a $500 million (R3.4bn) investment in South Africa with that full knowledge, so it's not something that stops you. But long term, economies and local businesses have to be competitive with their global competitors,” he said.
The R3.4bn investment by Ford was in some of the latest automotive manufacturing technologies at its plant in Silverton in Pretoria for the production of the new Ford Ranger pick-up launched at the motor show last week and its engine plant in Port Elizabeth.
The investment has increased the annual production capacity of the plant to 110 000 units, with 75 percent of this earmarked for export, and created thousands of jobs.
The new Ford Ranger is also being produced in Thailand and Argentina. Ranger units produced in South Africa will be exported to 148 of the 180 markets globally where the bakkie will be sold.
Hinrichs said labour costs in South Africa were higher than in other emerging countries, including fellow Brics members Brazil, Russia, India and China.
He stressed that if South Africa continued to desire to be an export base, which drove a lot of investment and job creation, it had to be globally competitive.
Labour unions typically tended to look at labour contracts in isolation over one, two or three years, he said, while the motor industry looked at what was going to happen over the next five, 10 and 15 years.
Jeff Nemeth, the president and chief executive of the Ford Motor Company of Southern Africa, said ultimately Ford did not expect any cost inputs, including electricity, utility costs and labour costs, to outpace the consumer price index.
Ford planned its business around this expectation, which was important to maintaining the long-term sustainability of the business.
Nemeth said the industry had been speaking to the government about this issue and had raised it with President Jacob Zuma earlier this month.
He said Zuma's response to the sustainability challenges facing the automotive industry raised in the meeting was to set up a task force headed by Economic Development Minister Ebrahim Patel to address the issues.
Hinrichs said Ford was one of the largest automotive manufacturers in the world and had the benefit of seeing what was happening in other countries like China, India, Indonesia, Thailand, Brazil and Russia, and shared this knowledge.
He stressed Ford wanted its business in South Africa to be competitive and successful.
He said: “We did not make this investment without those intentions. So we have a free flowing dialogue on the topic because it's in all our interests for it to work out and be successful.” -Business Report