Wednesday, June 9, 2010

Foxconn hoping to share cost of wage rises with customers

HONG KONG: Foxconn International Holdings'' said it hopes to reach an agreement with customers about raising prices to pass on wage rises that it has extended to its Shenzhen employees.

Foxconn said on Monday, June 7 that it would raise wages of its Shenzhen production line workers to 2,000 yuan a month subject to a three-month performance evaluation, based on a recommendation from its parent Hon Hai Precision Industry.

The pay rises followed criticism of the company's working conditions which some people blamed for a spate of suicides.

Speaking after Foxconn's annual general meeting Tuesday, the company's chairman and chief executive, Samuel Chin, said he was optimistic that it would be able to come to a "good resolution" with its customers over pricing.

"It's a partnership ... so we have to understand each other's needs," said Chin, describing the relationship between Foxconn and its customers. Its clients include Apple, Hewlett-Packard, Dell, Sony Corp, Nintendo, Nokia, Cisco Systems and Lenovo.

He said he hoped to be able to pass on as much of the costs to customers as possible.

A group of around 20 protesters were at the AGM demanding that Foxconn increase wages further to 2,300 yuan per month. The protesters, representing a group called Students and Scholars Against Corporate Misbehaviour, said large corporations, in particular Apple, were partly responsible for the deaths of Foxconn workers, and called companies to monitor their supply chains more closely.

Chin said the wage rises would undoubtedly affect profit margins in the short term, but would benefit the company in the long term.

He added customers were continuing to increase outsourcing production to manufacturers like Foxconn as the economy improved.

He also said the company might consider expanding its production lines in lower-cost countries such as Vietnam.

Speaking at Hon Hai's AGM in Taipei, chairman and founder Terry Gou said the latest wage rises will not significantly increase the company's costs, but the company would consider moving some production lines to Taiwan for automated production.

Chin denied that the repeated wage rises, an aggregate increase of some 67%, were ordered by the Chinese government.

Chin said the company had been mulling wage adjustments for months because of the difficulties in hiring workers in China.

An analyst said Foxconn's moves sent a "very strong signal to other companies' factories in Shenzhen", and that this was likely to result in a "strong improvement in conditions" for mainland workers. Foxconn shares closed 3% lower at HK$5.49 on Tuesday. ' South China Morning Post

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