RETRENCHMENTS AT MERCEDEZ BENZ SA SHOULD BE AVERTED

The South African Federation of Trade Unions (SAFTU) joins the National Union of Metalworkers of SA (NUMSA) in condemning Mercedes-Benz South Africa’s (MBSA) decision to retrench workers from its East London manufacturing plant. They intend to cut 700 jobs out of the “roughly 3 000 jobs.

In their official statement, Mercedes-Benz South Africa argues that “deteriorating macroeconomic conditions, prolonged port issues, fluctuating exchange rates, and rising costs of fuel, energy, and logistics” are responsible for their ‘woes’. Contrary to Mercedes-Benz’s arguments, the primary reason for restructuring is underwritten by the need to keep profit margins afloat or maximise them. Our claim is backed by the financial records of Mercedes Benz South Africa, which shows it recorded a R4,4 billion profit in 2023, an increase of R1,1 billion from a profit of R3,2 billion in 2022. So, whilst the complaints about other economic factors are legit, they are not the primary reason for restructuring and retrenchments. As their annual report shows, they are interested in ensuring continued growth of their profit margins. If their transition from a 3-shift model to a 2-shift model will guarantee them value higher than the value they make today, it means workers’ exploitation will intensify and be prolonged. It can only be intensified by bringing better machines and prolonged by extending the working day. This exploitation is meant to achieve nothing but maximised surplus and profits thereof.

Further, it is incomprehensible that this company is embarking on retrenchments when the automotive industry is inundated with incentives from the government. In addition to the grant incentive, these companies in the automotive are also benefiting from export tariff relief. In 2014, Mercedes-Benz was one of the automobile companies that benefitted from R493 million in tariff relief through AGOA. The purpose of these government guarantees and incentives should help these companies not only rake in profits but also save jobs. However, let us reckon with the negative impact of the port crisis and consumer demand decline.

Firstly, ports are central to the circulation of goods. The crisis that has engulfed Transnet thus has a negative bearing on the circulation of goods. This crisis will certainly contribute to lower sales of goods, leading to lower earnings and declining profit margins. Acting capitalistically, firms are forced to cut operating costs to maximize their profits.

Secondly, demand is central to the existence of capitalism. The interest rate hikes by the South African Reserve Bank (SARB) have particularly impacted demand for luxurious vehicles as the middle class is squeezed. The middle class, which is the largest consumer base for luxurious cars like Mercedes Benz, has suffered severely from the rising cost of living as debt servicing costs have ballooned, forcing them to reprioritise and cut their spending. Mercedez Benz is certainly basing its plan on consumer demand expectations, which is shown by the consumer confidence that has
declined.

It is however not true that the expectation of a decline in local consumer demand alone will be catastrophic to Mercedes-Benz’s earnings. Mercedes-Benz SA is exporting 90% of its South African production. This means its sales are not significantly affected by the rising cost of living that affects consumer demand in South Africa. The amalgamation of these factors plays a role in impacting economic growth. But this is not the case for Mercedez Benz, it is a reprimand we have repeatedly issued in our arguments against the government’s monetary and fiscal policy, and its bungling of rail freight. Capitalism is based on sales, circulation and production, any interruption of
these crucial stages create a crisis.

SAFTU firmly rejects retrenchments as a mechanism for profit maximisation. Unemployment rose to 12,1 million in quarter 1 of 2024, and any retrenchments will exacerbate the crisis of unemployment. The retrenchments will have severe consequences for the affected employees and their dependents. With the high unemployment rate this loss of income will also plunge families into debt, and it will make it difficult for them to afford basic necessities.

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