Wednesday, June 30, 2010

iPhone China factory moving to cheaper location

Apple iPhone supplier Foxconn is relocating the main plant to a cheaper province in Northern China rather than trying to improve working conditions in the existing plant in Shenzen in South China.

Foxconn has been hit by a spate of suicides by workers allegedly frustrated by harsh working conditions in the factory. After 13 incidents of suicide this year, the company announced 66% raise in wages. However, reports now say that the company has told workers that only those who shift to the new plant in Tianjin will receive the raise.

Media reports today suggested Foxconn is planning to relocate the main plant from the more expensive Shenzen to Tianjin where labour cost is relatively lower.

Minimum wage in Tianjin is 920 yuan ($132) while the minimum wage in Shenzen, where Foxconn plant is currently located, is 2000 yuan ($295).

Foxconn will shift 300,000 out of the total 420,000 workers in the Shenzen plant to the Tianjin plant.

Foxconn shares are down 44% so far this year. The company has warned that its first-half losses may swell due to weaker pricing.

Wednesday, June 23, 2010

Toyota and Honda face labour action in China

The labour strike in China has spread from Honda to Toyota halting their production, the two biggest Japanese carmakers.

Toyota was affected by strike at one of its suppliers located in Tianjin, near Beijing. The strike has forced Toyota to shut the night shift in its main plant which manufactures the Camry and Yaris.

A series of strikes have been reported at other suppliers for Toyota and Honda.

A key feature of the labour strikes in China in recent weeks is that they are not targeted at western multinational companies' local plants who have relatively better labour practices.

Strikes so far have affected mostly Taiwanese and Japanese companies, both laggards in corporate responsibility. They usually have top down authoritative management styles.

Western automakers however face a different kind of risk. While they may have good industrial relations in their own plants due to better labour policies, their business may suffer due to potential labour unrest at their Chinese business partners. An example is a labour dispute that has broken out at Yanbao, one of the largest BMW dealers in China. Yanbao employees want a pay rise complaining current wages are low.

This means multinational companies now much chose their business partners very carefully and pursuade them to adopt responsible labour practices.

While workers are forcing companies to increase wages, the new Yuan policy is likely to make their exports more expensive. A double whammy.

Wednesday, June 16, 2010

The Toyota You Don't Know

An interesting read here:

The Toyota You Don't Know, The Race to the Bottom in the Auto Industry from The National Labor Committee, USA.

The report says: "Right now, Toyota and the U.S. auto companies are locked in a race to the bottom, which will inevitably lead them to adopt each others worst practices."

Labour discontent in China

In China, labour discontent over low wages and working conditions is under the spotlight. Angry workers have gone on strike in a number of factories owned by Taiwanese and Japanese companies.

There are worries that the labour unrest can potentially snowball into a major social crisis for the government as well as the industry. The issue has become so hot that China's premier Wen Jiabao has urged better treatment of particularly migrant workers.

Here are some of the stories doing the rounds in the local and international media:

Honda, which was hit by labour strikes in its China plants, says the company was surprised by the strike and that it needs to improve communication with employees. Honda's rival Japanese car maker Toyota says that it regularly talks to workers for better understanding of each other.

This story says that Taiwanese companies which have been at the core of Chinese industrial development over the last 30 years, are not heading home as labour unrest in China heralds an era of rising labour costs.

A New York Times story says that the current labour movement is China is independent of government-controlled unions, a trend with hugely political dimensions in a country where organising labour outside the government-controlled union is prohibited.

Honda workers are even demanding the right to form their own union, an unprecedented situation in China's labour market.

And this report predicts that the days of cheap labour in China are numbered now.

And this report suggests that rising labour costs will ultimately force factories to move closer to labour sources, and working conditions will become more humane. The report quotes a local expert as saying: "The biggest losers will be coastal governments that side with the factories to protect their revenues, if they refuse to change."

And this newspaper report in India hopes that China's loss will be India's gain.

Wall Street Journal reports that rising labor costs in China are forcing U.S. apparel and accessories retailers, such as AnnTaylor Stores Corp. and Coach Inc., to consider relocating at least some of their production to countries with cheaper work forces.

Wednesday, June 09, 2010

Bhopal verdict: Corporate irresponsibility does not cost much in India

It took a quarter of a century to get the first court verdict in the the Bhopal gas disaster case, the worst industrial disaster in history that killed thousands of people. But the verdict was instantly and spontaneously rejected by everyone.

A local magistrate court in Bhopal convicted seven former executives of Union Carbide India Ltd after a trial that lasted 25 years. The convicts include now 85 year old Keshub Mahindra, former Union Carbide India chairman and the patriarch of India's one of the most influential business families that owns automobile maker Mahindra & Mahindra. He is currently the chairman of Mahindra & Mahindra. One of the guilty has already died.

But what has angered public is the lightness of punishment meted out to the convicts. The judgement awards two years imprisonment and Rs. 100,000 ($2000) fine each. All convicted executives were immediately granted bail so that they can file appeals in a higher court (sessions court) against the judgement. The appeal may take another quarter of a century before any outcome.

Even if the higher court finally upholds the lower court's judgement, the convicts will still be able to file two more appeals in the high court and then in the supreme court. Should we say that these appeals may take another quarter or half of a century before the appeals are exhausted?

There is a strong possibility that eventually none of the convicts will serve time in jail or not even pay a single cent in fine.

The current court order has also fined the company, which does not exist anymore, a meagre sum of Rs. 500,000 (about $10,000) for the disaster that killed over 4000 people immediately and over 20,000 people in the aftermath.

The victims' lawyer commented: "The worst industrial disaster in the history has been reduced to a traffic accident."

The case has once again highlighted the serious flaws in India's already notorious legal system, corrupt political establishment and rotten bureaucracy.

The judgement sends a wrong signal to the business community in India and to multinationals operating in India. In a way, it implies that even if a company's irresponsible actions kill thousands of people, it will take 25 years to get the first verdict out and hopefully another 50 years for appeals. It also signals that the punishment finally may not be any significant. The judgement then is in no way a deterrent judgement.

The court found these executives guilty for causing death by negligence, culpable homicide not amounting to murder and gross negligence under the Indian Penal Code. These sections of IPC do not warrant severe punishment. So the prosecution failed to bring more serious charges against the company executives. There is a widely held suspicion that the charges were diluted on instructions from senior politicians over the years.

Nevertheless, the judgement is a key milestone in a way. It is the first time a court has found the company and its executives guilty in the case. Union Carbide chairman Warren Anderson who has avoided appearing in Indian courts would perhaps have been found guilty too. India's half-hearted efforts to get him extradited from US have failed. The court has announced him an absconder and his arrest warrants have been gathering dust. There are other court cases pending where he finally may be convicted ex-parte.

The public outrage over the judgement which many called a "mockery" may however force the government to take some tough measures to hold rogue companies accountable. This can also potentially trigger a closer scrutiny of companies' behaviour in India where corporate responsibility does not exist on the agenda.

The backlash will also make it more difficult for the ruling politicians who are desperately trying to pass a nuclear disaster liability bill in parliament that aims at putting a cap on the maximum liability for nuclear plant operators and their equipment suppliers in case of a disaster. The international nuclear lobby has been pushing for such legislation before they start selling equipment to India or bid for nuclear plants. There is already a strong NGO campaign in India against such attempts.

Nervous politicians are already trying to play to the gallery. Even the law minister has said he is disappointed by the judgement. The environmental minister has said he wants the first of the proposed green courts to be set up in Bhopal.

But the government has acted with greater irresponsibility than Union Carbide over the past 25 years. Union Carbide paid $470 million to the Indian government in a settlement to cover compensation to victims. Only a fraction of that money has been disbursed so far. Victims' families and survivors complain that government officials want bribes to entertain their claims. As a result, a large number of survivors who suffer from diseases resulting from the exposure to the poisonous gas leak continue to rely on relief and treatment provided by NGOs.

See a comprehensive story on the Bhopal Gas Disaster that we published in the current issue of Ethical Corporation magazine.

And if you like, listen to my brief interview on the Bhopal judgement on Radio Australia here.

Thursday, June 03, 2010

Even my guinea pigs don't know how to stop BP's oil leak

This morning I asked my guinea pigs if they knew how to stop the oil leaking from BP's Deepwater Horizon rig in the gulf of Mexico. They did not seem to have any idea. The older one just stared at me blankly. The younger one simply turned his face away.

Then I asked the tree outside my house. From my childhood, I remember having read about a wise tree which had all the answers. But the tree I spoke to seemed quite dumb. No response.

Then I noticed a crow sitting on a branch of the tree. Crows are considered stupid as I remember from my childhood story of a crow and a cunning fox. Still thought no harm in trying luck, for BP's sake. I asked the crow if it had any idea how to stop the oil leak. The crow looked at me suspiciously and flew away.

I have heard BP has already asked Steven Spielberg if he can help in stopping the leak. Wondering if they have asked Mr. Bean. He may have an idea or two for BP.

How about asking Stephenie Meyer? She might know some secret community of vampires who feed on oil rather than blood? With any luck, these vampires could be potentially deployed.

Or perhaps they should ask a couple of fortune tellers in India. A tantric may even help by sending an army of ghosts or demons to the gulf of Mexico to stop the leak instantly.

So here we have a master stroke by BP's public relations machine. By asking the public to give ideas on how to stop the gushing oil, BP is trying to create an impression that managing this disaster is beyond currently known scientific knowledge and that the company can not be blamed for whatever is happening. They are also giving an impression that this disaster is an unfathomable accident, beyond humble humans' understanding.

And they are right. Even my guinea pigs don't know how to stop this damn leak. How on earth BP scientists and engineers would know the solution?

The real question is where is the copy of the risk assessment BP carried out (I hope they did) for this rig. And what were the risks they identified? And what was done to manage those risks?

BP has not yet said that they will not contest the penalties imposed by the US authorities whether civil or criminal. They have not said that they will not use the might of expensive lawyers to drag the court proceedings to delay or deny paying the penalties (as Exxon did so successfully after the Valdez oil spill disaster).

Wednesday, June 02, 2010

China's labour rises in protest

China's labour market is showing signs of change. Labour strike at car manufacturer Honda's factory in China indicates that multi-national companies' over-reliance on China's cheap labour to stay competitive may not be a good business strategy. The strike also indicates rising tensions in China due to increasing disparity in wages and earnings.
This New York Times story on Honda strike says the strike is a wake up call to Japanese exporters.

Workers of Honda factory are on strike protesting low pay and poor working conditions. Such strikes are usually illegal in China. But in this case, even the state media gave a wide coverage to the strike and workers' demands in the initial few days of the strike. Then suddenly all content was removed from the state media sites. State media's initial coverage indicates the Chinese government's growing impatience with a low wage economy and a new desire to move up the wage ladder.

This analysis by a labour group concludes that "the reverberations from the strike by a relatively small number of Honda workers are just an indication of the political and economic ramifications of any broader upheaval of the Chinese working class."