General Motors South Africa has started discussions with its labor pool to cut down employment at its Struandale vehicle assembly plant in Port Elizabeth, amid shrinking local and export demand for its products.
The American company confirmed on Monday that a massive decline in demand had pushed it to reduce planned production.
In order to lessen the impact on the company’s enterprise and 1,800 employees, General Motors said it was negotiating with stakeholders to consider all alternative solutions, with voluntary separations and early retirement approved benefits.
According to a GMSA’s spokesperson, Denise van Huyssteen, the company had advised staff about its situation and asked the Commission for Conciliation, Meditation and Arbitration to organize talks with staff and unions. The discussions would not have come at a more troublesome time as the company’s key union, the National Union of Metalworkers of South Africa, is already working on difficult debates on a new three-year industry agreement on wages and conditions. General Motors is not the only company suffering with new vehicle sales in South Africa.
The local market is projected to decline up to 12 percent this year, marking its third consecutive year of decline. Out of 333,802 new vehicles exported from South Africa last year, General Motors added just less than 5,000.
All those vehicles were delivered to sub-Saharan Africa, where low oil prices and other economic constraints have put an end new vehicle sales for all brands. The final result in Struandale, which has a yearly production capacity of 100,000 vehicles, will manufacture less than half that number this year.
Having built less than 45,000 in the previous year, van Huyssteen said production would fall this year. She refused to say by how much, but market shares so far indicate the figure could get near to 40,000. Struandale produces the Isuzu KB one-ton Bakkie, Chevrolet Utility small Bakkie and Chevrolet Spark car.
Analysts’ View on General Motors
Shares of General Motors gained 1.44 percent to $29.65 at the close yesterday, with a volume 12,707,300 shares traded. That figure was higher than the stock’s average daily trading volume of 12,329,389.
General Motors is currently trading below where it was a year ago, with the share price down 17.89 percent. Meanwhile, the stock has a 52 week high of $36.88, and a 52 week low of $24.62. Its existing market capitalization 45,655,959,000.
On the other hand, the average twelve month price target of 17 market analysts covering the company is $37.00, which indicates that the stock could still earn more that in 21 percent. The highest price target is set at $50.00, which suggests an increase of 29 percent.
In the company’s latest quarterly reports, earnings per share fell to $37,265 from $39,621 in the previous quarter and revenues hit $12,711.
This year, no less than 20 brand names built by General Motors made the strongly desired top 10 in sales ranking in American made vehicles.
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