Thursday, July 10, 2008

Renault ends Romania strike

The Financial Times
By John Reed in London
Published: April 12 2008

A strike at Renault’s Romanian Dacia unit ended on Friday after management agreed to offer workers a pay rise of about 22 per cent.

The almost three-week wage dispute had threatened to disrupt production of the Logan, Renault’s low-priced global emerging markets car, of which Dacia is the group’s biggest producer and supplier.

A senior Renault executive, speaking to the Financial Times, put the net cost of the strike for Renault at €12m-€15m ($19m-$23.7m). “We have been managing our supply chain in order to minimise the impact, and we do not expect to lose sales,” the executive said.

Dacia is the largest producer of the Logan – which Renault also makes in five other countries – and the car’s engines and gearboxes.

The vehicle has been one of the group’s most successful vehicles as Renault shifts its focus from western Europe to emerging markets. Carlos Ghosn, the chief executive, believes the company will be selling most of its cars in emerging markets within a decade.

The dispute highlights the upward pressure on costs carmakers face as they seek to move plants to lower-wage regions such as eastern Europe, where demand for cars is higher than in developed markets.

Philippe Houchois, European autos analyst with JPMorgan, said: “We’re seeing a more militant approach by labour in low-cost markets like Romania.”

Ford Motor, which also recently bought a car plant in Romania, last year faced a three-week strike at its plant in St Petersburg, which it settled after offering workers salary increases of between 16 and 21 per cent as part of a new contract.

According to local media reports, workers demonstrating against Dacia this week near its plant in Pitesti, northwest of Bucharest, the capital, held up a banner reading “Wake up Romania! We no longer want to be European Union slaves”.

Dacia said that company’s current gross monthly salary of 1,663 lei ($716) was 18 per cent higher than the average salary in Romania.

It rejected unions’ initial demands for a 50 per cent salary increase, before offering to hike their gross monthly salary by 360 lei in two instalments, plus a profit-sharing bonus based on 2007 results equal to one month’s salary.

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