By BERNIE CAHILES-MAGKILAT
Some 1,200 workers from the 35 direct parts maker companies including logistics and production supplies will be displaced and some ₱240 million worth of inventories and machineries will be left useless once Honda Cars Philippines Inc. (HCPI) ceases manufacturing of two passenger car models at its Sta. Rosa, Laguna factory next month.
Ferdinand Raquelsantos, president of the Philippine Parts Manufacturers Association, said in a report during a discussion with Trade and Industry Secretary Ramon M. Lopez on the estimated effect in the auto parts supply chain following the decision of Honda to abandon its Philippine operation as part of the Japanese carmaker’s rationalization effort for its global operation.
According to Raquelsantos, their assessment showed that the 1,200 workers are direct employees of the 35 auto parts maker companies, Tier 2 & 3 suppliers, and other indirect contractors including logistics and production suppliers of HCPIs. These affected auto parts workers are on top of the soon to be displaced 387 factory workers of HCPI.
Originally, there were 47 parts makers supplying for both BR-V and Honda City, but the latter has terminated production for its model life, reducing its suppliers to 35.
In coming up with the computation, Raquelsantos said that all suppliers follow a 3-month firm order, plus a 3-month forecast and about another 6 months lead time for raw materials ordering. With the forecast of 4,600 units of Honda BR-V model for the next 12 months, inventory to this pipe line will turn dead.
“We estimate this inventory to be around ₱240 million plus the Tool & Die, Assembly Fixtures that will turn useless,” said Raquelsantos, whose seatbelts manufacturing was supposed to start supplying to Honda.
There are total of 7 auto parts companies that directly supply to HCPI, including Q-Shakai, a Japanese-owned parts maker that supplies to Honda. However, these companies’ production output is about 70-80 percent for export.
“We just hope they won’t leave, as there are local Filipino tier 2 parts makers that supply to them also,” he said. “The Philippine Automotive Parts Makers Association believes that Honda Cars Philippines, Inc. will comply with their obligation to pay for those component parts and raw materials inventory that will be turn dead,” said Raquelsantos.
Lopez also said that HCPI has committed to pay these affected parts suppliers.
“This closure is a big shock for all of us, we understand that Honda Worldwide has done similar closures, including Production facilities in Europe. For now, our trust is to look for new job assignments to these affected workers,” he said.
With the closure next month of Honda, automotive parts makers are urging the DTI to expedite the implementation of Safeguard Measures to protect local car assembly and to pursue the trade retaliatory measure to stop the surge of importation of completely built up (CBU) car units.
“We believe this will be the key to sustain whatever local assembly we have and even entice new entrants to promote additional employment,” he said.
He welcomed plans for the implementation of the Safeguard Measures by DTI by the end of the second quarter this year.
“This will mean that prices of locally produced completely knocked-down vehicles will be competitive versus the imported CBU units,” he said.
Raquelsantos also urged for the imposition of the 15 percent tax incentive to locally produced products under the Flag Law.