A new strike has broken out at a Chinese factory making exhaust systems for Honda Motor <7267.T>, prompting the carmaker to plan a suspension at two local car plants just days after a strike at another supplier was settled.

The industrial actions at Honda's China suppliers, both in the southern city of Foshan, come against a backdrop of rising labor costs and growing worker agitation at other employers around the Pearl River Delta, one of China's main manufacturing hubs.

One of the region's top employers, Foxconn International Holdings <2038.HK>, a unit of Taiwan contract electronics giant Hon Hai Precision Industry <2317.TW>, has offered workers at its Shenzhen manufacturing hub big pay rises as it tries to deal with fallout from a spate of suicides there.

Workers at the exhaust factory, a joint venture between Japan's Yutaka Giken <7229.Q>, which is 70 percent owned by Honda, and Taiwan's Taoyuan Fuwei, had been on strike since the first shift on Monday, Yutaka Giken spokesman Kazuhito Anma said.

Local government officials were onsite to negotiate with the workers, said the secretary of the Taiwan Business Association in Foshan. The factory employs about 500 workers.

Honda spokeswoman Natsuno Asanuma said production would be suspended at Guangqi Honda's two plants which build the Accord, Odyssey, City and Fit, on Wednesday due to a shortage of supply. Plans for Thursday and beyond are still unknown, Asanuma said.

We're hearing that the parts plant has started operating partially, but for Wednesday we are out of components, she said.

The plant makes mufflers and other exhaust parts for Honda's four Chinese car factories belonging to Guangqi Honda, a 50-50 joint venture between Honda and Guangzhou Automobile, Dongfeng Honda and an export-only factory that builds the Jazz subcompact.


Reuters Insider on China wages http://r.reuters.com/vax67k



The labor action at the plant, Foshan Fengfu Autoparts, began early on Monday when about 20 workers began rallying their colleagues to go on strike, the South China Morning Post reported.

The entire workforce had downed tools as of Tuesday afternoon, and management was negotiating with workers with the aim of restarting production as soon as possible, the Yutaka spokesman said.

Their action comes after workers at another plant supplying transmissions to Honda's China joint ventures received a pay raise last week after striking over wages, bringing Honda's car production in China to a halt.

If their strike hadn't been successful, our workers here probably wouldn't be as united as we are now, the South China Morning Post quoted a 22-year-old worker from Hunan province as saying.

Asian employers in general have become less attractive among foreign employers for Chinese workers, said Lin Huaibin, an industry analyst with IHS Global Insight.

If you ask college graduates to pick their employers, most would pick U.S. or European companies. Japanese, Korean and Taiwanese companies have never been at the top of the list, not just because of lower salaries but also because of rigid management styles, Lin said. If they don't want to see more strikes and walkouts, they'd better raise salaries and change the way they run their businesses.

(Additional reporting by Fang Yan in Shanghai, Alison Leung in Hong Kong and Lin Miao-jung in Taipei; Editing by Chris Lewis, Lincoln Feast and Karen Foster)