Mercedes-Benz South Africa (MBSA) has announced that more than a quarter of its staff at the East London plant, about 700 workers, will be retrenched as costs mount and sales fall.
MBSA, in a statement on Thursday, confirmed it had started the process to activate Section 189 of the Labour Relations Act, which allows employers to dismiss employees for operational requirements.
This will result in restructuring manufacturing at the plant.
“MBSA has reached the decision to enter a consultation process,” the statement said.
The group had already implemented measures to address and improve performance, including cost-saving initiatives and efficiency improvements.
MBSA said that in recent years, the automotive industry had faced several challenges that had also affected the company and its suppliers. Those included deteriorating macroeconomic conditions and prolonged port challenges.
MBSA executive director Andreas Brand told the Daily Dispatch that international sales had waned.
In all, motorists in 86 countries have loved the Mercedes C-Class the East London plant produces, but the love affair is over for now, and it could be permanent.
He said that the company had to face reality and reduce shifts from three to two for more efficiency.
Brand said the plant’s international reputation as one of the finest in the world was unquestioned.
It wins manufacturing awards on a regular basis, scooping four international competitive awards over six years.
“Between 2021 and 2023, when demand was high, the plant had to increase staff to meet the demand. All its KPI [Key performance indicators] were beating expectations,” Brand said.
Now that international demand has dropped, MBSA has to take draconian measures.
Brand said reducing the shifts was the most efficient method.
Worse news, is that the 20,000 workers at the 16-odd component parts suppliers that service MBSA could be affected.
The majority are based in the East London Industrial Development Zone.
The workers will be affected, but probably not to the extent of the MBSA workforce.
The parts suppliers have yet to announce their plans to counter the reduced demand for their wares.
It is estimated that 160,000 people in East London rely on MBSA, to some degree, for income.
Setting up the changes to cope with the C-Class cost a combined R16bn and the then new plant was pivotal to MBSA’s recent success.
It was one of the top-performing Mercedes plants worldwide, which was tied to the success of the C-Class, the company’s most successful export model and the cash cow for East London.
Introduced in 1993, the C-Class has gone through six generations, and is now in its last.
More than 10.5-million of the vehicles have found homes worldwide.
The plant produced 90,000 models in 2023, according to the company’s website.
MBSA said it was not a buyers’ market as many people had reduced their spending.
Buffalo City Metro spokesperson Samkelo Ngwenya said on Thursday the city had noted with concern MBSA’s plans.
Ngwenya said MBSA had informed mayor Princess Faku and city manager Mxolisi Yawa of its intention to scale down its workforce.
“The metro views the latest developments with sadness and concern.
“We have no doubt about the commitment of MBSA, as they have invested immensely in the city.
“We have seen our city bidding and winning several major bids within the vehicle globe.
“The implications of retrenchments in our city have huge socioeconomic implications,” Ngwenya said.
Commenting on the challenges at the Port of East London, he said: “We note some of the issues raised and take comfort in the fact that the issue of the port is finally receiving attention.
“This is something we have been advocating for years to Transnet and, unfortunately, it has come at a price.
“We are hopeful that this can fast-track the plans to develop the port.
“This is something that can turn around the situation and bring in more investment and create job opportunities.”
Black Business Forum (BBF) president Luthando Bara said though he was sympathetic to the challenges faced by MBSA, he was equally “shocked and concerned” over the pending job losses.
“... the loss of these jobs will undoubtedly have a devastating impact on the affected individuals and their families. It is disheartening to witness another wave of retrenchments in a sector that has already experienced significant recent job losses.”
Bara said the automotive industry played a crucial role in the provincial economy and the wellbeing of its workers should be a priority for all stakeholders.
“We urge Mercedes-Benz South Africa to explore all possible avenues to mitigate the impact of these retrenchments, including alternative employment opportunities and support for affected employees.
“Additionally, we call upon government and industry leaders to collaborate on long-term solutions to address the underlying issues facing the automotive sector, ensuring its sustainability and the livelihoods of its workers,” Bara said.
Cosatu provincial secretary Mkhawuleli Gura Maleki said the impact would be “ghastly” as each of the 700 employees set to lose their jobs was “responsible for no fewer than 10 other people in their families”.
“This figure will translate to over 7,000 people suffering. The township economy will also suffer.
“It’s such a vicious cycle with devastating effects to many in the economic chain,” Maleki said.
“MBSA is one of four car manufacturers in the Eastern Cape, and the only one in Buffalo City Metro, so obviously the economy of this metro will take a serious knock.”
Border-Kei Chamber of Business executive director Lizelle Maurice said: “It’s difficult. I understand people are disappointed. They are shocked and concerned.
“You take that decision because you want to stay open.
“It’s either jobs are going to be shed or you close your business, that’s a tough decision.”
Maurice said if MBSA did not implement these measures now, it might have to close down and the number of people losing jobs would no longer be 700, but more than 3,000, which was the plant’s total staff complement.
“It’s sad news yes, it causes uncertainty and fear, but such employees can just take severance packages and go open up their small businesses or do something creative,” Maurice said. — Additional reporting by BusinessLIVE
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