Inside Adidas’ Indonesian factories

Adidas have a pretty poor record when it comes to respecting workers rights in their supplier factories. In one of Adidas’ supplier factories almost the entire union leadership was fired after striking over wages. In this and other Adidas supplier factories, workers have to work at high intensity for long periods and are paid very low wages.

Adidas claim to support workers’ rights but at the same time the company wants high quality, fast, flexible and cheap production. This forces factories to choose between business and workers’ rights. The following case illustrates Adidas’ lax consideration of workers’ rights.

• Workers struggle for their rights at Panarub supplier
• Adidas’ largest supplier ‘laggard’ on social responsibility
• Thousands making Adidas lose their jobs

Workers struggle for their rights at Panarub supplier

Sacked after fighting for better pay

The Panarub factory, located near Indonesia’s capital Jakarta, employs more than 10,000 workers, mostly women. The factory makes shoes such as the Predator X boots, which were heavily promoted for the 2010 World Cup.

In October 2005, 33 workers from the Panarub factory were fired after they participated in a legal strike trying to get better pay for the thousands of workers in the factory. Workers are paid as little as 60 cents an hour and there have been dramatic rises in the cost of living in Indonesia.

The 33 workers — almost the entire Perbupas union leadership at Panarub — accepted severance pay through economic necessity in April 2007. Thanks to the 9,000 emails sent by Oxfam supporters to Adidas in 2006, the dismissed workers were paid a monthly hardship allowance by their management after pressure from Adidas. The allowance helped workers to survive while they tried to resolve their case for reinstatement.

Several of these former union leaders have applied for re-employment at other Adidas suppliers. But despite Adidas’ promise to support their employment opportunities, their job applications have been largely unsuccessful and a number remain unemployed.

Freedom of association still fragile

There are still ongoing violations of workers’ union rights at the Panarub factory. In June 2009 The Perbupas union (now called SBGTS) re-established itself in the factory, and currently has around 2,000 members. Through this union and another union at the factory, workers are pushing for better pay and conditions.

While Oxfam Australia is disappointed that Adidas did not take stronger action to persuade its Panarub supplier to reinstate the union leaders dismissed in 2005, we welcome this progress. Most sport shoe factories don’t allow workers to organise democratic trade unions to defend their interests. In response to your emails and letters, Adidas has persuaded their Panarub supplier to allow some level of union freedom at Panarub.

Yet freedom of association at the factory remains fragile. In September 2010 several thousand workers at Panarub went on strike over concerns around their payments in the lead up to the important Lebaran celebrations. Several workers were injured when police violently dispersed the striking workers who were gathered at the factory gates. Oxfam Australia believes that this violence may have been avoided had Panarub factory management effectively negotiated with worker representatives at the factory.

Not enough food

Workers at Panarub are asking for an extra 76 Australian cents per day on top of the current 55 cents daily food allowance. A single small serve of rice and chicken in the area can cost around $1.30, which is a lot for workers who are only earning around $5 a day. So an extra 76 Australian cents per day would help workers with the rising cost of food.

Adidas’ largest supplier ‘laggard’ on social responsibility

Yue Yuen Industrial produces one sixth of all sport shoes made in the world each year for major sportswear brands including Nike, Adidas and Puma. It owns giant factories in China, Vietnam and Indonesia and each factory employs tens of thousands of workers, mostly women. According to a 2009 report by Oxfam Hong Kong and CSR Asia, Yue Yuen is failing to adopt sound corporate social responsibility (CSR) policies and practices. The report is the first attempt to provide a snapshot of how 43 companies listed on Hong Kong’s Hang Seng Index weigh up on their CSR policies and practices. Yue Yuen rated only 22 out of 100 and was classified as a “laggard”.

Thousands making Adidas lose their jobs

In November 2006 the Pt Spotec and Pt Dong Joe factories closed, leaving 10,500 workers without jobs. These factories produced for Reebok and then for Adidas after Adidas bought Reebok. Oxfam Australia is concerned that the buying practices of Adidas were most likely a major cause of the factory closures. The Indonesian Footwear Association reported that Adidas/Reebok had not increased payment to these suppliers over the past 5 years. Around the same time, Adidas told journalists that its 27% profit increase was due to the Reebok purchase allowing the company to negotiate cheaper prices with suppliers. Adidas has not yet provided evidence that buying practices did not contribute to the closure of PT Spotec and Dong Joe.

Adidas alleges both supplier factories had “huge and unsustainable debts due to gross financial mismanagement.” However, trade unions involved in the factories believe that the factories’ debts were partly because of an upgrade in infrastructure carried out on Adidas’ request and other pressures on the factories as a result of Adidas’ purchasing practices.

Adidas has informed Oxfam Australia that in response to the job losses, the company wrote off air freight costs for shoe products to enable factories to settle wages. Adidas also wrote off the costs of materials removed by workers and provided medical assistance to workers who were laid off.

Oxfam Australia, the unions from the factories and concerned citizens from around the world encouraged Adidas to help the workers find new jobs.

In February 2009 we collectively persuaded Adidas to make sure ex-Spotec workers were prioritised during recruitment and employment at their new sport shoe supplier factory (CLI), which took over the site of the old Spotec factory. As a result, 1,450 ex-Spotec workers have now got jobs at CLI, including a number of the trade union leaders. Oxfam Australia welcomes this progress, but remains concerned about the fate of the 9,000 workers from Spotec and Dong Joe who didn’t get jobs at CLI, including a number of former trade union leaders. We’re worried that union leaders from these factories might have been blacklisted and denied work in other factories.

In 2010 Adidas reported that 1,500 former Spotec workers are now employed at its Ching Luh Indonesia (CLI) supplier. Oxfam remains concerned that a number of former Spotec workers and union officials have faced discrimination in applying for jobs at CLI, and we hope that Adidas will keep its commitment to assist these former workers in obtaining employment.