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The High Price of Cheap Goods.

by Natalie Pace.

Includes a Technology Report Card featuring Apple, Cisco, Dell, Hewlett Packard, Microsoft, Intel and Amazon.

Multiple suicides at a Chinese factory that assembles iPhones, Kindles & PCs.

The world’s most popular phones/computers/readers/PCs and more are assembled at a Chinese-based, Taiwanese-owned, factory that has become a hotbed of employee deaths of late. It is widely reported that there have been, 13 suicide attempts and ten resulting deaths at FoxConn Technology. (Source: BBC, the AP, China Daily, Reuters and various other media outlets). Foxconn employs 800,000 workers and is one of the most popular technology factories in Asia. This is where many Apple, Sony, Dell, Nokia, Cisco, Intel, Microsoft, Nintendo, Amazon, Motorola, Nokia and Hewlett-Packard products are assembled by Chinese workers with very little education, and, by some reports, even less freedom.

This isn’t news, really. There is already a Wiki page devoted to the crisis at FoxConn. Working and living conditions at Foxconn came under scrutiny in 2006, after an article by two China Business Daily writers, Wang You and Weng Bao, who reported on (alleged) unsavory factory conditions. Wang and Weng were subsequently sued by FoxConn, had their assets frozen and were fined $3.77 million – a decisive judgment that scared off articles critical of FoxConn for years thereafter. A recent Wall Street Journal (on May 27, 2010) op-ed piece claimed that the article published by Wang and Weng had been "shown to be false." Whether the ultimate truth is that the reporting was shoddy or Foxconn was successful in buying off the judge (both claims have been made), Reporters Without Borders and Steve Jobs, who reportedly intervened, were successful in having the fine reduced to one yuan (12 cents) and the reporters’ assets were released.

After the article was published, Apple conducted an audit of the factory. The Apple audit didn’t turn up any major grievances that employees had with the factory and found "the supplier to be in compliance in the majority of the areas audited." The Apple auditors recommended reducing the workers’ overtime and putting in an employee and manager training protocol that would prevent potentially objectionable disciplinary punishment – mostly long periods of standing -- which two employees had complained of.

With the spate of recent suicides, however, the Foxconn situation has become heightened. There are daily updates on China Daily and other Chinese media. The Chinese government has promised an investigation into the Foxconn crisis and to release the results of this investigation to the public. At the same time, the Chinese government is also assuring Taiwan business owners (like the owners of Foxconn) that the country will continue "favorable policies" for enterprises based on the mainland.

While the tragedies are getting headline coverage and senior government handling in China (a country with censorship policies), the situation has largely flown under the radar in the U.S. Regular updates continue to be provided from Reuters and the Associated Press, but the ink and airtime devoted to this crisis is relatively small, considering the gravity of the situation. The Wall Street Journal covered the suicides on May 27, 2010 (the day after the 13th death), in an online op-ed with the headline, "It's too soon to draw conclusions about a complex issue," which stated, "Indications so far are that conditions in the factory are good and job applicants are eager to work there." Without providing any evidence of the investigative journalism required to make such claims, the Journal’s opinion writer went on to note, "Several of the recent suicides seem to have been related to love affairs gone wrong," and that "suicide clusters" are common among "young people, who are highly suggestible."

Foxconn, which employs 800,000 workers in China, has already begun making changes. The company has, reportedly, hired psychiatrists, increased wages (effective October 1, 2010, for workers who satisfy a probationary period and performance evaluation), installed safety nets on buildings and will have an outside real estate contractor manage at least half of their dorms going forward. (Source: various reputable media outlets, however there was no press release on the Foxconn or Hon Hai websites.) But will that be enough to stem further suicides?

One journalist, JonT, at the Shenzhen Post, who claims to know both workers and management at Foxconn, counsels that the issues run deeper than wages (though the pay raise is certainly a leap in the right direction). None of the below complaints of JonT’s sources were identified in the Apple audit. JonT claims that the comments provided by his sources are not part of the public record because: "You see employees will say one thing to reporters and to investigators under threat of the company’s pendulum and a whole other thing to a friend of a friend over Johnnie Walker."

So, with the forewarning that the following is unsubstantiated, secondhand hearsay, which must be false or to have been deliberately hidden from the view of Apple’s auditors in 2006, I publish this blogger’s comments. There are plenty of U.S. companies and Chinese officials conducting a thorough investigation at Foxconn and now is the time to turn over all rocks and see what crawls out. If these claims are true, they should be addressed head on and corrected immediately. And if these claims are without merit, an in-depth investigation will only give American consumers greater confidence in factory conditions where their favorite products are assembled.

According to JonT, workers are fined for infractions such as arriving late, missing work (even if they are legitimately ill), washing their own clothes, talking while on the job and purchasing clothes and other personal items outside of the designated on-site store. (The Apple audit posted on Hon Hai’s website made no mention of the company fining the workers for any reason whatsoever.) One employee reported that she had to borrow money to pay the negative balance from her salary one month, and that women were at risk of sexual harassment from the onsite managers -- including rape. As for the movies and pools and other recreational facilities on the "campus" of the factory, those perks are limited to upper management, according to JonT’s source, and even if they were extended to the blue collar workers, there was no time left after 18 hours of work to enjoy them.

Ten suicides in a population of 800,000 people are far lower than the U.S. national average (which experienced 13 suicides for every 100,000 people age 20-24 in 2000). However, the fact that all of the suicides are clustered in one central location (Foxconn campuses) is alarming. One well-documented incident is the suicide of Sun Danyong on July 16, 2009, which centered around a missing iPhone (not love gone awry). It is widely reported that FoxConn Security used abusive and illegal measures for interrogating Sun Danyong about the missing phone and that the company later apologized to Sun’s family (sources: Wall Street Journal, Southern Metropolis Daily, Sina Online News and ND Daily). At the time, the security official Gu Qinming, denied any physical abuse, saying, "I was a little angry and I pulled his right shoulder once to get him to tell me what happened. [The beating] couldn't have happened."

Last Monday (on June 20, 2010) social scientist Yang You-ren from Taiwan’s Tunghai University told the Associated Press, "Foxconn's military management model, including scolding and sometimes beating front-line workers, helps drive isolated Chinese workers to kill themselves. If the company does not put an end to that, there will be more suicides in the future."

Cheap labor is the dirty underbelly of low-priced products. No giant U.S. technology company is exempt. Under the world’s increasing scrutiny, however, CEOs with factories in China are being forced to reevaluate the living and working conditions of their labor force.

The major U.S. companies who contract with Foxconn have joined together, led by the Electronic Industry Citizenship Coalition. Steve Jobs has vowed that Apple is "on top of this." Hewlett-Packard launched an investigation of Foxconn earlier this month, and, according to a statement on June 8, 2010, has already identified "a number of areas of improvement and we are actively working with Foxconn to address these concerns." Michelle Mosmeyer, a Dell spokesperson, updated me by email, writing, "Dell is actively investigating this situation. We recognize the magnitude of this situation, and we are concerned and saddened by this terrible loss of life." Ms. Mosmeyer further commented, "Our hope is that in the wake of this tragedy, the EICC task force can drive global improvements that address this difficult issue."

If you own shares in a major technology company and wish to voice your concern over the Foxconn tragedies (or thank them for their commitment to getting to the bottom of this and correcting the situation), simply go to the company website, click on Investor Relations and there you should discover an email or snail mail address for your comments. These technology companies are very popular holdings in mutual funds and Exchange Traded Funds, so it is likely that you own them in your 401K, IRA, etc., and thus have a voice that increases in power with each additional person who joins you.

Click on the Technology Stock Report Card to discover which companies can afford to have their factory costs increase without a substantial hit to the bottom line, and which might already be looking to move their factories to Viet Nam.

Today, I added Amazon to the Cooling Off portion of my Hot News on Cool Stocks List.

 

 

About Natalie Pace:
Natalie Pace, is the author of You Vs. Wall Street and host of the Pace and Prosperity radio show on BlogTalkRadio.com/NataliePace. She is a repeat guest on FoxNews, CNBC, ABC TV and has contributed to Forbes.com, Sohu.com and BestEverYou.com and Magazine. As a philanthropist, she has helped to raise more than two million for Los Angeles public schools and financial literacy. Follow her on http://www.facebook.com/pages/Natalie-Pace/416616285568, on BlogTalkRadio.com/NataliePace and on YouTube.com/NataliePaceDOTCOM. For more information please visit, http://www.nataliepace.com.

 

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