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South Africa labor still 'inherently unstable' after strike ends: BMW

By Wendell Roelf

CAPE TOWN (Reuters) - BMW said on Monday the labor situation in South Africa remained "inherently unstable" and it had no plans to reverse a freeze on expansion, even after car parts makers ended a four-week strike.

Car makers told Reuters they were hoping to return to full production later this week, after parts manufacturers agreed to a three-year wage deal with the National Union of Metalworkers of South Africa (NUMSA) on Sunday.

The deal gave a breathing space to an industry that accounts for 6 percent of GDP.

But prolonged labor turmoil has left some firms considering how much to invest in South Africa and BMW said last week it was no longer considering expanding production there because of the labor unrest.

"The fact that the strike went on for four weeks is proof-perfect that the labor environment in South Africa in inherently unstable," BMW spokesman Guy Kilfoil told Reuters.

"And that's a perception - certainly in our parent company's mind - that won't change overnight, and certainly not by a strike ending that should have ended weeks ago," he added.

NUMSA leaders have already dismissed BMW's comments on freezing expansion as brinkmanship, saying the German car maker must seek the union's approval before making any major changes to its operations.

The car parts strike hit as the industry was recovering from three weeks of industrial action by more than 30,000 workers at major auto makers including BMW, Ford , Toyota <7203.T> and General Motors .

STRIKE COSTS

Makers estimated that earlier strike cost them $2 billion in lost output while it was too early to estimate the impact of the latest action.

"The extent and the duration of the industrial action this year has been the worst and longest on record," said the executive director of the National Association of Automobile Manufacturers, Nico Vermeulen.

Toyota Motor Corp <7203.T> lost production of 14,889 vehicles during the nearly two months of strikes, said spokesman Leo Kok.

"We restart production with today's night shift and hope to be up to full production later this week," he added.

German automaker BMW aimed to be back to full production by Friday, after losing production of about 13,000 vehicles during the strikes, spokesman Kilfoil said.

The ruling African National Congress (ANC) has protected the auto sector to provide relatively well-paying manufacturing jobs in a country where unemployment has been stuck at around 25 percent for years.

But some car makers have long complained that wage hikes have not been met by higher productivity and labor relations are ranked as among the world's worst in the World Economic Forum's Global Competitiveness Report.

Economists have said a long-standing governing alliance between the ANC and unions has led to labor-friendly legislation which has made the jobs market overly rigid and is eroding the country's competitive edge.

The central bank has been worried about the damage caused by labor strife that has slowed production in mines and factories, especially after South Africa's trade shortfall unexpectedly widened to 19.05 billion rand ($1.90 billion) in August, the biggest gap in seven months.

Workers at Anglo American Platinum , the world's top platinum producer, have been on strike for more than a week in protest against planned job cuts the company says it needs to return its operations to profit.

Amplats has said it is losing an average of 3,100 ounces of production a day from the strike. Gold producers and unions agreed to wage hikes of up to 8 percent last month, ending a three-day strike.

(Additional reporting by Jon Herskovitz; Writing by David Dolan; Editing by Andrew Heavens)

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