The automotive industry and the components sector were not looking for a bail-out from government, but rather bridging finance to get it through the current difficult economic times, representative organisations said on Wednesday.

Speaking at a Retail Motor Industry conference in Johannesburg, National Association of Automotive Component and Allied Manufacturers (Naacam) president Stewart Jennings said the automotive components industry only required short-term bridging finance from government agencies.

National Association of Automobile Manufacturers of South Africa (Naamsa) president David Powels agreed that such financial assistance to the automotive industry would be repaid.

Jennings, meanwhile, noted that the year ahead would remain tough for the components industry, which he said, was the most vulnerable sector in the automotive industry, as it was related to the manufacturing sector.

Jennings said that government had to recognise the importance of “rescuing” the automotive components and the manufacturing sector and had to ensure appropriate protection for the sector, drive the “buy South Africa” campaign further, and ensure real labour productivity change to improve the sector’s competitiveness and reduce unemployment.

Government also had to try to promote increasing the percentage of local components.

He said that the South African government and the National Treasury did not always understand the challenges facing the manufacturing sector or the sector’s importance.

Further, the seven original equipment manufacturers (OEMs) in the sector were all foreign-owned companies which subjected the local companies to certain strategies that might not be appropriate for the local sector.

Jennings asserted that the local automotive components sector was fully invested in, and had good capabilities and skilled workers to remain successful. However, some changes were needed to assist the sector in surviving the current downturn, with working capital remaining a big challenge for the sector.

More support from OEMs would be required, while deglobalisation would also assist in promoting the local industry.

APDP NEXT BIG STEP

Meanwhile, Powels asserted that the Motor Industry Development Programme (MIDP), which would be replaced by the Automotive Production and Development Programme (APDP), had reached its objectives to some extent.

He said that the MIDP had led to improvements in the local sector’s competitiveness, led to improvements in the affordability of vehicles locally, encouraged growth in exports, led to a stabilisation in employment in the automotive sector, and created a better foreign exchange balance.

The MIDP had been the first step in boosting the local automotive industry, said Powels, but noted that the APDP would have to ensure that the country took the next big step.

An industrialisation strategy needed to be developed to improve the supplier competitiveness in South Africa and to increase the manufacturing depth of the industry in all tiers.

The Industrial Development Corporation would have to promote this industrialisation strategy along with the APDP, he noted.

Further, the average produced volume for each platform would have to be increased to above 100 000 units a year, compared with the current 75 000 units a year.

The local use of automotive content also had to be increased to above 70%, compared with below 40%, which was the current situation.

The country would also have to continue to invest massively in training and skills development in the industry, stated Powels.

PUBLICATION: Engineering News
AUTHOR: Chanel Pringle
DATED: 18th March 2009