Nike's busy hands; As foreign workers stitch together profits

Austin American-Statesman
Jeff Manning

CU CHI, Vietnam -- Steel molds drop out of ovens with a thunderous clang. Trimmers scream like giant dental drills. Huge sewing machines hum and clatter.

Nguyen Thi Van, 19, seems to sense none of it. The worker, one of 35,000 in Vietnam and 450,000 worldwide making products for Nike Inc., concentrates only on gluing the shoe parts that flow toward her.

The job requires precision and speed. If Nguyen doesn't meet her daily production goal, she won't receive her bonus. If she fails three times, her South Korean bosses at the Samyang Vietnam Co. Ltd. factory could fire her.

For the past three years, that relentless pressure has typified the Asian factories that churn out Nike shoes and clothes. Demand for Nike products more than doubled, forcing the company and its subcontractors to crank up production. That, in turn, increased the heat on workers and, in some cases, led to outright abuse. The resulting backlash promises to dog the Beaverton, Ore., company well into the 21st century.

Last spring, Nike found itself trying to explain a series of labor problems to U.S. and Vietnamese ambassadors. Former U.N. Ambassador Andrew Young, an adviser to the company, has even predicted that Nike will be an issue in the next presidential election.

Company chairman Phil Knight, who has said the criticism is not based on truth,'' is by turns furious and philosophical.

For whatever reason, we've been the poster boy on globalization,'' he said in a rare interview.

The emergence of a more unified global economy can mean jarring collisions between industrialized and agrarian cultures. Nike, perhaps more than any other U.S. company, is having to face what that means for corporations, workers and governments:

What responsibilities do corporations inherit when they build worldwide production networks? What share of the wealth these giant companies create should go to workers, both those abroad and those in the United States? What are the political mplications when corporations are beyond the control of any one nation?

A look at Nike, which had profits of $796 million on sales of $9.1 billion in its most recent fiscal year, sheds light on these questions.

Behind the famous swoosh symbol is a network of Asian manufacturers that dates to the company's beginning in 1964. By 1997, that network spanned 33 countries on four continents and included about 350 subcontractors making products from Air Jordan shoes to soccer shin guards.

Worker abuse, although not common, has accelerated as Nike's subcontractors have moved from one country to another in search of cheap labor. Managing the mix of cultures and languages at Nike-aligned factories is one of the company's biggest challenges, Knight said.

Three years of meteoric expansion pushed this global machine to its limit. The strain became more apparent when The walkout was one of six at Samyang's Vietnam factory alone as workers protested low wages, wretched working conditions and various disciplinary actions.

Vo Thi Oanh, a 21-year-old Vietnamese woman, learned just how harsh that discipline could be in the fall of 1996. A South Korean manager at the plant tried to issue a warning to Vo for spending too much time in the bathroom.

Vo, who according to a co-worker was ill with diarrhea, refused to accept the warning. She was fired on the spot, and her co-workers walked out of the factory in protest.

An image problem

As news of such incidents spread, critics called for Nike to raise wages to give factory workers a higher standard of living, to shorten the workweek to a maximum of 48 hours and to eliminate abusive disciplinary tactics used at some factories.

Nike officials say critics are unfairly singling out their company and distorting the issue. The factories of Nike subcontractors improve the workers' lives by offering crucial jobs at respectable wages, company officials say. Working conditions have improved dramatically through the years, and abuses are relatively few.

Jarmo Vahtervuo, a Nike production director in Vietnam, and C.J. Park, the factory manager, squint in the searing midday sun at a sea of bicycles and motorscooters in the parking lot of Tae Kwang Vina Industrial Co. Ltd., which sells all of the plant's shoes to Nike.

As sweat soaks through his shirt, Vahtervuo explains that when the factory opened two years ago, workers rode bicycles or walked. Today, many Tae Kwang workers have $3,000 motorscooters, thanks to their factory wages.

The plant's 8,800 workers, who earn an average of $1.50 a day, have helped pull off a marvel of industrial production. The $35 million factory, built on the grounds of the former Long Binh U.S. military base in Dong Nai province, can turn out as many as a half-million shoes a month, some of which require 150 manufacturing steps.

The factory operates with amazing efficiency, especially considering that many of the workers are in the first industrial jobs of their lives.

Some of the labor abuses really happened, there's no point in denying them,'' Vahtervuo said. We are trying to fight our way out of that image because we think they were isolated. But the whole company has been stamped.''

Park, a South Korean, is managing director of the factory. Vahtervuo, a Finn, is Nike's technical liaison to the plant. Such cross-cultural relationships, repeated all over Asia, contribute to the Nike labor controversy.

As Nike grew, its Asian manufacturing operations came to incorporate a tricky melange of cultures and languages. Here at Tae Kwang, Vahtervuo represents his American employer in dealings with a South Korean subcontractor, which in turn is overseeing 8,800 Vietnamese.

The real important issue is trying to blend these three very different cultures -- the Koreans, Vietnamese and Americans, or the Taiwanese, Indonesians and Americans,'' Knight said, acknowledging that we have by no means mastered it.''

Old animosities

The Koreans and Taiwanese bring a demanding management style and negative historical overtones to many of their plants.

South Korean troops fought alongside the Americans in Vietnam and earned a reputation for ferocity. They are very brutal and impatient,'' said Luong Van Ly, deputy director of the Vietnam Ministry of Foreign Affairs in Ho Chi Minh City.

Vietnamese animosity toward China, a former occupier on the northern border, goes back centuries.

D.J. Lim, president of Samyang Vietnam, said the problems between the South Korean managers and Vietnamese workers stemmed from difficulties communicating and are being corrected. Before, we didn't know ... the Vietnamese people ... the Vietnamese culture,'' he said.

In one of the few air-conditioned rooms at the Tae Kwang factory, Park ponders the tension between Korean managers and Vietnamese workers. I tell my people, Don't shout, don't get angry,' '' he said. We have to change our image.''

As serious as Nike's image problems have become, the company has no plans to change its hugely profitable subcontracting strategy, which allows Nike to focus more energy on designing shoes and garments and developing marketing campaigns.

Nearly all of Nike's major apparel and footwear competitors have revamped their procedures to mirror Nike's, boosting marketing expenditures to about 10 percent of sales and shifting manufacturing to overseas contractors.

This month, Levi Strauss Co., which has seen Nike cut into its market with sweats, fleece products and other casual clothing, announced plans to close 11 plants in the United States and Canada. In El Paso, where Levi is the largest employer, 1,500 of the company's 3,900 workers will lose their jobs. The jeans giant said the factories can't compete with low-cost overseas operations.

The current year brought a possible solution to some of Nike's production problems, but not one the company sought. None of Nike's latest designs has been a big hit, and growth projections for fiscal 1998 have dwindled from 18 percent to 12 percent.

As of August, Nike had cut off four three plants in Indonesia and one in China. Subcontractors have laid off at least 50,000 workers. About 450,000 more continue to stitch and glue and work the assembly lines.