Question

Review information for The South African Motor Industry (The South African motor industry originally emerged through the assembly of knock-down kits of parts from abroad. Over the years, these developed into fully fledged manufacturers. This was largely due to the active industrial policies of the apartheid government (in power from 1948 to 1994), which aggressively promoted import substitution. Under apartheid, racial discrimination in the communities was mirrored by racial Fordism: blacks were largely condemned to poorly paid unskilled work. This led to many industries relying on cheap labor to solve systemically imposed inefficiencies.

In the 1970s, a wave of unionization of blacks took place, eclipsing the older, white- dominated trade unions. By the early 1980s, the new (“independent”) unions became increasingly outspoken in opposing the apartheid order. Mass resistance in communities was paralleled by an upsurge in strike action. In the Mercedes-Benz plant in East London, the resistance became so intense that large areas of the factory were rendered no-go areas for management. Finally a grouping of workers occupied the plant, damaging inventories and machinery.

The close of the apartheid era alleviated much of the underlying tension; at the same time, managers began to forge cooperative deals with unions. At Mercedes-Benz, these included very much better pay and working conditions, new opportunities for up-skilling and career advancement and a range of participative mechanisms, giving workers a real say in the process of production. Today, the plant is one of the most productive car plants in the world, and its products have the fewest defects of any Mercedes-Benz plant. While previously the plant was marginal, and by the late 1980s under threat of closure, today it is an integral part of the Mercedes-Benz worldwide production network.) case 3.1 then answer the following questions in accordance with the criteria below (Write 150 word minimum for each question, points will be deducted if each question does not meet the minimum 150-word required for each question):

1.       Summarize the study

2.       What lessons does the Mercedes-Benz East London plant hold for HR managers worldwide?

3.       Is the experience of Mercedes-Benz in East London relevant to other industries.

4.       If yes, please explain. If not, why not, please explain.

Answer 1

1. As the summary based on several points and information which are

Market Overview

The automotive sector in South Africa is the mainstay of the national industrial base and accounts for 6.9% of GDP (4.4% manufacturing and 2.5% retail). South Africa improved its global ranking to 21st (24th in 2014) in the world with a market share of 0.68%. Exports to NAFTA, at $1.66 billion, declined from the $2.04 billion exported in 2016, due to the appreciation of the rand against the U.S. dollar in 2017.  Another reason for the decline in automotive exports could mainly be attributed to the decline in catalytic converter exports and vehicle exports to the United States in 2017. Vehicle exports to the United States, at 40,414 units, were down by 7,213 units from the 47,627 units exported in 2016. Exports comprised mainly of the left-hand-drive BMW 3-Series as well as smaller volumes of the new generation Mercedes-Benz C-Class and the Ford Ranger. The BMW 3-series, of which the main export destination has been the U.S. market, has reached the end of its lifecycle and will be replaced by the X3 model. The X3 model will not be exported from South Africa to the United States in future, as this model is also being manufactured in the United States.  

The automotive industry represents an increasingly important strategic and catalytic role in the overall South African economy by impacting directly on many important aspects, such as contribution to GDP, employment, skills development, economic linkages, technology and innovation, and making significant contributions to the fiscus through taxes, and substantial foreign direct investment. Total automotive revenue in the ambit of the automotive business sphere in South Africa amounted to over $42 billion in 2017. Exports of automotive products in 2017 accounted for $13 billion, equating to 13.9% of total South African exports. However, the automotive export revenue declined in 2017 due to a stronger rand exchange rate and the time effect of major new model introductions. The United States and South Africa have expanded bilateral trade significantly under AGOA, with the growth in automotive imports from the United States, up to 2017, at 361% in nominal rand value terms, proportionally much higher than the growth in South African automotive exports to the United States, at 300.1%. The win-win dispensation for both South Africa and the United States under AGOA builds goodwill, contributes positively to sustaining employment in the United States and South African supplier and vehicle manufacturing industries, and results in regional development and positive integration momentum. American automotive corporations are represented in South Africa. Ford Motor Company SA is the leading automotive manufacturer in South Africa; however, General Motors SA divested in November 2017 from South Africa due to declining sales in an increasingly competitive market.

Several top U.S automotive component suppliers are represented in South Africa, including Johnson Controls, Lear, TRW Automotive, Tenneco, Federal Mogul, Delphi, Visteon, and ArvinMeritor, amongst others. All of these companies have built strong business links between their South African operations and other international stakeholders. These established business links enhance the potential for mutually beneficial trade between the United States of America and South Africa. The %age increase in automotive exports from 2001 (when AGOA commenced) to 2013 equaled 306.8%. The %age increase of automotive exports from the United States to South Africa was 321.9% during the same time frame.

Original equipment manufacturers (OEMs) and official dealers and repair specialists work closely together to provide maintenance and repair services. They also cooperate to ensure warranty service, driver safety, environmental protection, spare parts availability, and information about technical improvements. The broader South African automotive industry incorporates the manufacture, distribution, servicing and maintenance of motor vehicles and components. In terms of the trade which supports this industry, there are approximately 4,600 garages and fuel stations (with the majority having service workshops as well) plus a further 1,898 specialist repairers; 1,374 new car dealerships holding specific franchises; an estimated 1,696 used vehicle outlets; about 292 vehicle component manufacturers, together with about 150 others supplying the industry on a non-exclusive basis; 1,508 specialist tire dealers and retreaders; 483 engine re-conditioners; 167 vehicle body builders; 2,907 parts dealers; and around 220 farm vehicle and equipment suppliers.

Automotive Policy

The Automotive Production Development Program (APDP) replaced the export-oriented Motor Industry Development Program in 2013 with the aim of stimulating local production of automotive components while maintaining the incentives for OEMs to manufacture passenger cars and light commercial vehicles in the country for export and the local market. One of the attractions of South Africa’s automotive policy over the past two decades has been its long-term vision and consistency. The APDP has reinforced policy certainty, which is critical for the industry to make long-term investment decisions. The APDP’s focus is on raising local value addition to enhance the automotive industry’s manufacturing output and export competitiveness. The automotive sector relies heavily on the additional economies of scale provided by exports and competitiveness is critical to its success.

Market Trends

Global new motor vehicle production in 2017 reached a record of 97,302,534 vehicles (2016: 95,057,929 units). This represents an increase of 2,244,605 vehicles produced or 2.4% compared to the 95.06 million new vehicles produced during 2016. South African vehicle production decreased to 592,145 vehicles in 2017 from 600,008 units produced in 2016 – a fall of 7,863 vehicles or -1.3%.

2017 and 2018 turned out to be difficult years for the South African automotive industry, with domestic new vehicle sales under pressure, particularly at the dealer level, despite attractive incentives and a strong contribution by the car rental sector which accounted for an estimated 12.5% of new car sales during the year. Industry trading conditions remained intensely competitive with over 55 brands and 2,872 model derivatives in the new car and light commercial vehicle sectors, competing for consumers. The vehicle-ownership ratio in South Africa is in the order of 180 vehicles per 1,000 persons.  2018 vehicle production is expected to expand to about 635,000 units.
Consumers in South Africa are spoiled for choice. In just about every segment of the market, every brand has a benchmark product. This offers car buyers the reportedly widest choice- to-market-size ratio anywhere in the world. On the light commercial vehicle side there were 31 brands with 615 model derivatives to choose from. The car ownership ratio in South Africa is in the order of 180 vehicles per 1,000 persons.

With respect to Africa’s regional integration agenda, South Africa remains important for the development of the region. Since South Africa is a catalyst for the future growth and development in sub-Saharan Africa, any reduction in trade in automotive products could have negative implications for growth and development in the Southern African region. Increased trade between South Africa and the United States, in the longer term, will create improved opportunities and demand for U.S. technical expertise, credit and markets and will also focus on incremental trade and investment opportunities between the two countries.

2. As the Mercedes Benz in east London gives a strong message to hr managers worldwide are that The Mercedes- Benz plant in East London is part of the C‑Class global production network whose lead plant is in Bremen. The network also encompasses the Mercedes- Benz plant in Tuscaloosa, USA, and the BBAC joint venture plant in Beijing, China. The plant in South Africa’s Eastern Cape province produces C‑Class Sedans for right-hand and left-hand drive markets for export. Since the production launch of the current C‑Class in May 2014, the plant has been producing the fourth generation of the highest volume model series of Mercedes- Benz. Since the summer of 2016, the C‑Class Sedan has also been rolling off the production line in East London as a plug-in hybrid. In 1958 Car Distributors Assembly Ltd. began producing Mercedes- Benz vehicles under contract. In 1984 Daimler-Benz AG acquired a 50.1 percent share in United Cars and Diesel Distributors (UCDD). Since then, the company has been registered as Mercedes- Benz of South Africa (MBSA).

3. The experience of Mercedes Benz London is relevant to others in several ways i.e

They offer internships in the following departments:

• Sales
• Information Technology
• Procurement
• Controlling
• Logistics

Through your internship you will have:

• We give you the chance to become familiar with a different culture.
• We provide support from experienced skilled professionals.
• We offer you work in a field of activity oriented to your field of study.

Our Requirements:

• You are enrolled as a student at a university.
• You are studying in one of the above-mentioned fields.
• You have work experience (training, other internships).
• You are fluent in English.
• You have advanced IT/computer skills.
• You bring intercultural competence.

4. Upon studying these facts on perfection and all in Mercedes Benz they give serious competition to others in industry as they are

Sub-Sector Best Prospects

The countries of origin for the aftermarket parts imported were aligned with the main countries of origin for new passenger cars and commercial vehicles. Imports from the traditional markets such as Germany, the United States, and the United Kingdom have declined over recent years, while imports from China have increased, indicating the cost competitiveness of this increasingly dominant automotive force. Despite the decline, the United States is still South Africa’s third highest sourcing country of aftermarket parts after Germany and China. The main automotive imports from the United States to South Africa are: light vehicles; OE components; engine parts; engines; transmission shafts/cranks; gauges/instruments; axles; tires; and automotive tooling

In addition, there has been a rapid growth in demand for automotive aftermarket specialty equipment and accessories in South Africa. This market size is estimated to be between $2–$2.5 billion. In the last nine years accessorizing and improving performance of vehicles has transformed from a hobby to a fully-fledged culture of fierce competition. In the race to individualize and distinguish their vehicles from others, enthusiasts constantly seek innovative, authentic specialty components and accessories with little regard to price. In this lucrative segment, South Africans are highly receptive to U.S. brands and often follow trends set in the United States.

The following performance products are sought after by dragsters in “the race to be the best”: intercoolers; ball bearing turbos; octane boosters; gauges; racing bolts; performance water injection systems, high flow injectors; racing clutches; metal head-gaskets; racing tires, nitro fed boosters, racing pistons; calipers and racing disk kits; high pressure fuel kits; gas flow cylinder heads; and dynamometers.  
A constant need to distinguish and individualize vehicles creates opportunities for U.S. suppliers of automotive interior and exterior accessory products such as body styling kits; racing seats; alloy wheels; suspension-lowering kits; graphics; steering wheels; gear and hand-brake pouches; boot spoilers and wings; aluminum pedals; and xenon light kits.

Opportunities

South African specialty equipment and accessory wholesalers and retailers constantly seek to expand their product range and welcome opportunities to establish distributor/agent agreements with U.S. firms. Most of the performance products are imported directly from the United States, United Kingdom, Italy, and Germany. However, these imports may not necessarily be purchased from the manufacturer or with any exclusivity and/or distributor agreements. This scenario leads to “rogue distributors” and fierce competition amongst wholesalers and smaller retail-customizing and performance shops. South African companies are interested in acquiring U.S. distributorships, however, either U.S. companies do not reply to their inquiries, or the U.S. company’s minimum requirement to ship is too large for the South African importer. This leaves the South African importers without much choice but to engage U.S. agents who consolidate and ship U.S. specialty products that are purchased from “third parties” to them. South African aftermarket importers and wholesalers often attend international exhibitions such as SEMA, AAPEX, Performance Racing Industry, and Automechanika to meet and partner with foreign companies not represented locally.