Honda hit by strike in China, shuts down all its plants

China's burgeoning automobile industry suffered a jolt as Honda, the second largest car manufacturer in the country, shut down all its four assembly plants after workers went on strike demanding better wages.

The strike set off alarm bells among scores of foreign firms whose investments are the driving force for China's rapid growth, as it is the largest industrial action in modern China ever since it began opening up its economy in a big way in the 1980s.

Strikes are anathema in China, as it transformed itself from a socialist system of the past to a capitalist economy, with the ruling Communist Party retaining a tight control on the government and the armed forces.

The strike is featured as the top story on state-run television and in the print media, giving maximum publicity.

The workers are demanding that their monthly salaries be raised from 1,000-1,500 yuan ($147-$194) to 2,000-2,500 yuan ($220-$367).

Operations at Honda's four auto assembly plants in China ground to a halt after 1,900 workers at the company's parts maker went on strike, official newspaper China Daily reported.

Negotiations were held between executives from all workshops and workers, but "due to vast differences, the two sides failed to reach a deal," according to a company executive.

Government agencies and trade unions are also trying to broker a deal, the report said.

A Foshan government official who was involved in the talks told China Daily that the government has not found any violation of the labour law by the Honda factory management.

The city's minimum wage is 920 yuan ($135) per month, but most of the workers are unsatisfied "because of rising consumer prices," he said.

The strike is continuing after negotiations broke down between the management of Honda's parts factory in China and its workers.

Automakers practice just-in-time delivery in parts and components, so the shutting down of one supplier can have a company-wide impact, as is the case with Honda.

As a result, the entire China operations of Honda Motor, Japan's second-largest automaker, have been at a standstill this week, it said.

The strike follows Honda's announcement earlier this week of an aggressive plan to boost production in China, raising annual production capacity at its Guangqi Honda joint venture from 360,000 units to 480,000 vehicles by the latter half of 2011.

Besides Guangqi Honda's two factories in Guangdong, which make the Accord sedan and Odyssey minivan, the other two affected plants are Honda Automobile China, also in Guangdong, and Dongfeng Honda in Hubei province.

One of the Guangqi factories is responsible for shipments to a dozen European countries.

Industry experts said the strike serves as a warning for other auto companies in China.

The wage levels at other automakers or suppliers are similar nationwide, said Duan Chengwu, a Shanghai-based analyst with the consulting firm IHS Global Insight.

He said other automakers in China should learn a lesson from the Honda episode.

"Profits in China's auto industry are relatively high compared to mature markets and there's room for increasing workers' benefits," Chengwu said.

A Chinese auto worker usually earns less than 10 yuan (less than $2) an hour, said Qiu Wencai, a professor at the automobile engineering department of Shanghai Jianqiao College.

China became the world's largest auto market last year after it sold more than 13.6 million automobiles.

But "the low wages could affect the future of the industry's future," he said.

Ma Qiufeng, a professor in sociology at Guangzhou-based Jinan University, called the strike "good news", because the workers' demand may help China become a more open society.

The strike at Honda¿s plants took place even as the country¿s largest foreign company, Foxconn, employing about eight lakh workers, is being haunted by a spate of worker suicides, which was largely attributed to tough managerial practices and low salaries.

So far, 12 employees committed suicides, mostly by jumping from their dormitory buildings, prompting the chief of the Taiwanese company, which manufactures a host of electronic products for top companies like iPod, HP, Sony Corporation and Nokia Corporation, to apologise.