By Boy Lüthje

December 23, 2010 -- Labor Notes -- 2010's auto worker strikes in South China reverberated throughout the country and overseas. As workers in supplier companies for Honda, Toyota and other auto multinationals downed tools, the international business press expressed fear over the rising power of workers in China.

At the same time, a tragic series of suicides at Foxconn—the world’s largest contract manufacturer of computers and iPods—exposed the inhumane nature of low-wage mass production for global brands such as Apple, HP and Nokia.

Both events shook unions and the public in China—and experts thought they could be a watershed moment for labour relations in the country.

But the workers’ activity disappeared from the media radar almost as quickly as it arrived. What happened?

Workers vs. boss—and government

In May 2000 workers at a Honda transmission plant in the Nanhai district of the city of Foshan went on strike. The trigger was a rise of the legal local minimum wage from $123 to $147, announced by the city government May 1 in response to rapidly rising costs of living. The workers expected a raise in their monthly wages equal to this amount. Factory management added $24 to the transmission workers’ monthly base wage but reduced their monthly subsidies (for food, housing and regular attendance) from $48 to $29. The net gain was only $5 per month.

Lean and mean… South China’s Pearl River Delta—around Hong Kong, Shenzhen and Guangzhou—has the largest concentration of manufacturing in the world. About 25 million industrial workers, most of them migrants from the countryside, churn out consumer products for global brands in garments, toys, furniture and electronics. The delta is a major hub for auto manufacturing: Honda and Toyota are there, Volkswagen is on its way and the rising star of the Chinese electric car industry is in Shenzhen. Supplier factories have mushroomed. Most produce for the Chinese market, but Honda and Toyota have started to export components such as engines to the West. The factories feature the latest in both technologies and organisation. The Japanese owners have brought their famous lean production system to China, featuring just-in-time production, management-by-stress and division of workers along the supply chains. Working conditions in the assembly and engine plants are comparable to those in modern car factories around the world, but upscale by Chinese standards. Auto workers are among the highest paid in the region. The monthly wage is around $400. Companies pay one to six times the monthly wage in bonuses each year; profit sharing and productivity bonuses are widespread. Overtime is within the legal limits (36 hours per month, based on a 40-hour work week). The average worker age is less than 24 at Toyota and less than 28 at Honda. Conditions at supplier companies are far worse. The factories are mostly clean and air-conditioned (still considered a luxury in South China’s subtropical climate), but wages are around the legal minimum of $112-144 a month. Overtime is often beyond the legal limits, which are not enforced by local governments. Turnover is very high. Many workers are employed as “interns” on placement from technical schools. … with Chinese characteristics Government policy is that all foreign-owned auto plants must be joint ventures with state-owned car makers. The suppliers, on the other hand, are directly owned by Honda and Toyota, and some have private Chinese or Hong Kong-based investors. The workforces at the core companies are local workers from Guangdong, while suppliers mostly employ migrants from rural areas. Migrant workers have no social or political rights, have restricted access to health, accident and unemployment insurance, and no right to settle in the localities where they work. These differences are also reflected in the structure of the unions. In the core factories, the official All-China Federation of Trade Unions (ACFTU) has an extensive bureaucracy that administers the companies’ generous welfare programs and acts as a consultant to management on wages and working conditions (there are no collective bargaining agreements). In most of the suppliers, unions don’t exist at all, or they have been installed on behalf of local government labour bureaus, Communist Party chiefs, or managers. — Boy Lüthje

The morning of May 17, two workers in the automatic transmission department halted the assembly line by pushing the red stop button, normally used for emergency shutdowns over quality problems. The Japanese plant manager met with the workers in the cafeteria and promised to reply to their demands within a week, and the night shift returned to work. Negotiations among management, workers and the factory union (which existed unbeknownst to many workers) took place during the following days, accompanied by further work stoppages.

The company offered various increases in bonuses and subsidies for different groups of workers, but the workers insisted on a general raise in the base wage. The company fired the two workers who had initially stopped the line. The harsh reactions of management galvanised the workers.

On May 24, the strike became indefinite, soon affecting Honda’s main assembly plants in Guangzhou and in Wuhan in central China. Both factories had to stop production on May 26 and 27, attracting national and international media and making the strike a public issue in China. The local government, along with the union and management, took a more and more aggressive stance, resulting in the mobilisation of a group of about 100 thugs clad in union uniforms, who confronted the workers physically.

Workers then wrote an open letter that was widely published in Chinese media and on websites. This unique document explained the workers’ case for social justice and their demands. At the core was a raise of $128 for all, plus raises for seniority and annual 15 percent increases.

The demand for seniority pay and guaranteed annual increases would have meant fundamental changes in the wage system. Base wages in China are generally very low (usually not more than half of regular monthly incomes), so workers have to rely on overtime and bonus payments awarded for “good behaviour” and submission to the boss.

Even more important, the Nanhai workers demanded free and open elections of union representatives in the factory.

Mediation or collective bargaining?

The escalation led to the direct involvement of Guangzhou Automotive, the Chinese mother company of the core Honda factories. The CEO—a member of China’s legislative assembly– took charge of negotiations. The Japanese manager of the transmission plant was replaced by a Chinese one. A prominent labour law professor from Beijing was brought in to facilitate mediation.

Thirty elected worker representatives took part in dramatic negotiations June 4, although only five were allowed to speak. The company had offered to raise total monthly pay from $240 to $336—but mostly in bonuses and benefits. Workers insisted on a raise in base wages, which would also augment overtime pay.

Under the final deal, the base wage hike and various other increases added up to $80, well below the initial demand of $128.

Thus bargaining was narrowed to a deal over extra pay to calm the workers down. Seniority pay was rejected as “too complicated” and postponed to further consultations. A big across-the-board wage raise and the introduction of seniority pay would have challenged the dominant system of low base wages and high incentive pay and provided motivation for workers to stay with the company and develop their skills.

Honda and Guangzhou Automotive effectively prevented a precedent for car suppliers in China. Jobs would remain low-paid and the union would continue to side with management.

Strikes spread, the union takes charge

But the events at Honda Nanhai triggered a chain reaction among workers in auto supply and electronics factories throughout the Pearl River Delta. According to the Guangzhou Federation of Trade Unions, more than 100 strikes occurred, of which only a small number were reported in the media. Around Toyota’s ultramodern factory in Guangzhou Nansha, eight of 14 core suppliers had labour conflicts. And action spread to other areas: workers in several electronics factories near Shanghai and at a Toyota supplier in Tianjin struck for several days.

Most of the strikes in the Delta were settled with raises similar to Nanhai’s, so workers’ action effectively established a kind of pattern bargaining. Employers also tried to coordinate behind the scenes: 100 representatives from car suppliers gathered in Guangzhou to discuss wage ceilings.

In the course of this strike wave, some unions began to show a remarkable change of attitude. When workers walked out at another Honda parts supplier on June 21, in the Nansha district of Guangzhou, the local union stepped in and took over bargaining. In this factory of several hundred workers a factory union existed, but it had completely lost the trust of the workers.

As often happens in such cases, higher-level officials from the city district union were asked to mediate. The district union refused and suggested that the Labor Bureau, the local branch of China’s Department of Labor, should take responsibility.

In a statement to media, the chair of the Guangzhou Federation of Trade Unions said the union’s job was to be on the side of the workers and that the government, not the union, should act as a mediator. The union also turned down the local police when they asked the union to bring workers’ representatives to the police office to discuss public security issues. (There had been no violence on the picket line.)

This highly unusual behaviour—the union siding with workers rather than as an intermediary or on management’s side—changed the workers’ attitude toward the union, and the district union was able to initiate an election of six workers’ representatives for bargaining. The settlement? $128 per month.

Changes in labour relations

The strike movement not only scared multinational corporations in China, it challenged the system of labour control. Typically, tacit coalitions between capitalists and local government rule over conditions inside the factories. Unions play a role in former state-owned enterprises and flagship joint ventures, but not in most private companies. Often, local governments back up violations of labour law by major investors, as has been documented in many cases for suppliers to multinationals such as Wal-Mart, Apple and Nike.

But under conditions of rapid growth and highly modern production, the methods of control have become ineffective. Hundreds of labour conflicts occurred in the wake of the global economic crisis, affecting millions of Chinese workers in 2008 and 2009. Following the recovery, workers are seeking a voice. Workers’ wages have been falling continuously as a share of China’s national income since the 1990s, when the shift toward capitalism really took off, and the government is now officially calling for higher wages in order to raise domestic demand.

New openness

Workers are taking advantage of this situation, since it gives legitimacy to their struggles. The changing climate is also reflected in an increasing openness in the media. For both the Honda strikes and the Foxconn suicides, the reporting has been unprecedented.

At the same time, contradictions over reforming labour laws and unions in China are mounting within the government and the Communist Party. The party leader in Guangdong openly declared his sympathy with workers’ demands and supports attempts by local unions to play a role in bargaining. Some provincial and local union leaders agree.

Although Guangdong has a reputation as the most capitalist province in China, the provincial government has issued a directive calling for democratic elections of factory unions, bargaining rights for workers on the shop floor, and a greater role for unions in bargaining at local and provincial levels. Workers could elect their union representatives and delegates for wage negotiations in factories. However, the directive remains unclear over the right to strike. Obviously, the government is looking towards foreign models of cooperation between unions, employers' associations and government, such as in Germany or Singapore, with stable unions but few strikes.

Such policies of course run into tough opposition from capitalists in Guangdong, including those from Hong Kong and Taiwan. Their cronies in local governments are joining the fight, opposing any kind of democratic reform in local government or unions. The power of these local coalitions became visible in Honda Nanhai after the strike. The chair of the existing factory union, who makes $41,600 per year, remains in office, despite consistent pressure from provincial union leaders.

The struggle for the right to union independence in China remains an uphill battle. In most other provinces, authorities take a much tougher stance toward labour conflicts. The national leadership of the All-China Federation of Trade Unions has not supported any substantial steps towards greater independence of unions from companies or government.

It is the activism of young migrant workers with almost no experience in workplace organising that is providing lessons to the unions—not only in China, but throughout the industrialised world.

[Boy Lüthje is a senior fellow at the Institute of Social Research at the University of Frankfurt in Germany and a labour educator for German unions, specialising in global production in China and other developing economies. This article first appeared in the US-based Labor Notes.]