FRANKFURT, July 28, 2008 (AFP) - Adidas, the second-biggest sportswear company in the world, feels that Chinese salaries are now too high and it will transfer some production to more competitive countries, its chief executive said in an interview on Monday.
Salaries, which are set by the government, have become too high'' in China, Herbert Hainer told the business weekly Wirtschaftswoche. Chinese production of Adidas sportswear, about half of the group's total, is going to decline,’’ Hainer added.
We have already opened our first factory in India. Countries like Laos, Cambodia and Vietnam will be added,'' the Adidas boss noted. Production will also return to former Soviet republics and eastern European countries,’’ but not to Germany, Hainer said.
I actually had hope they had pulled out due to ethical reasons…I’m not so surprized reading the entire report. Nice post as always KK.
Rupert
CharlieFrancis.com
I wonder if they’re couching the ethical reasons in economic terms because, obviously, Adidas is going to be producing their stuff in China until they have factories built elsewhere. Just as obviously–and I hope the real message reads–there are other poor countries in the world where Adidas can produce sporting goods that are not providing military assistance to the genocide in Darfur.
Bullshit. Adidas wants the cheapest labor it can get. Companies paying workers 50 cents a day shouldn’t be allowed to disguise their greed.
Charlie is right…all those big corporates want to have the lowest labour cost available…the problem is…that the countries remaining are not that much, so in the next 10 years, this model of industry will undergo undesired changes…(FOR THEM,…)
I wonder the real cost to make a pair of $200 shoes?
$1 each?? $5??
You have to watch a movie called “The corporation” it is a very enlightening and eye opening movie. They were at a nike factory, where nike nows how long (in seconds) it takes to produce a product and they brake down the real cost of producing a product. From what I remember it works out to be 5 or 6 cents a t-shirt or something rediculous.
Last I heard 1.50 for flats and 2.00 to 2.50 for spikes. That included costs and profits of the 3rd world plant.
I actually had hope they had pulled out due to ethical reasons…I’m not so surprized reading the entire report.
Ditto.:mad:
Yes me too!
Just to play devils advocate…
FDI from early entrants, such as adidas, seeking location economies have stimulated the national economies of countries such as China and S.Korea so that the demand for labor is such that they can now increase their wage rates. A similar thing happened years ago in India and Taiwan with outsourced programming: firms that had been doing the grunt work for US firms such as GE, because they were endowed with lowcost labor, were competing against them in foreign markets 10 years later due to the competencies and capital they gained from relationships which were initially meantto exploit them.
So although the adidas’s of this world are looking for labor economies, their presence in developing countries can help stimulate growth.
Other than low cost labor, China has little else going for it, so how do they attract foreign capital?
On a second point, meds cost a fractionof a cent to produce yet sell for significantly more. This is because production is only one stage of the value chain which also includes R&D (which admittedly adidas and nike seem to be neglecting considering their flagship spikes are going on 10 years), distribution and marketing, which unfortunately seems to be more important to todays public.
Lastly, the IOC need to grow some balls and push back on China. Three weeks ago Rogue tried to bring the human rights issue, reminding china that a part of their campaign was based on opening up china to the world and making its human rights activities more transparent, china told him to “focus on the sport and they’ll focus on politics”, and he did.
Good post Dazed. These big mean corporations are actually doing what noone else can. producing jobs and bettering the lives of the poor.
Yes they turn great profits.Yet they put food in the mouths of millions. No govt can do this and no charity can do this. It is also the corporation that spends the capitol,takes the risks and develops the ideas for a bussiness.
It is the taxes that these rich corporations pay along with the taxes of it’s employees that pay for all the social entitlement programs that we all desire.
It’s a good thing that big corporations bring work and money to poor countries, eventually pushing the development of workers’ rights in the mid term, at least thru the increase of salaries.
It would be good if the corporations would use their economical power to change things in 3rd world countries voluntarily (even if, of course, it’s not their purpose by any stretch), which is not the case, that’s why some of us were kind of disappointed by reading the Adidas story.
But there still should be a middle ground.
Improving working conditions(no abuse or corporal punishment of the workers) and making wages high enough that families have the option of not sending their kids to work at age 10 would go a long way in improving these situations and everyone still wins. The workers have some hope that at least their kids have a chance for something better and the corporations still make plenty of money.
By the way, most people don’t have a problem with ‘evil’ corporations. Certainly if a company or someone develops a useful or popular product they deserve to reap the rewards for their innovation. But that doesn’t mean that they deserve a free pass when they do something sleazy.
One of the things I truely believe China will struggle with as its population becomes wealthier is the accountability that the people will start demanding of the government. The emergent middle class in India who want a better life for their children and are rightly demanding higher education, health and infrastructure for their exponentially growing tax rupee’s, are a recent example of this; however where we are today is largely due to similar shifts in the western world during the 19th century, education and better wages imbued the working classes with political and economic power (child labor also began to receed at this time). China gets indignant when it is suggested they stop shooting their citizens so I can’t see such action as being tolerated at all…
It would be nice in a perfect world to see corps do that but they tend to react to the laws of economics rather than humanitarian needs - unless the two cross paths. Why is it in a boards best interest to pursue such causes if they’re only going to get sacked because their shareholders (probably most people on this board with a super or pension fund, insurance or a bank account) demand that they create shareholder value?
Business is severely limited in the 3rd world (different to developing nations such as china) as often the only thing a government has going for it is its soverignty which could easily be destabilised if multinats whose profits are larger than their GNP start providing services the government should. Economic and political instability does not help to attract foreign capital either.
Regardless of any potential benefits their self-interest might yield, Adidas and Puma are in no position to be sanctimonious about the Chinese political party (especially considering the party their founders once belonged to).
sweet dreams. The only ethics they know is called “profit”. Today companies would gladly use slave labor if presented the opportunity 