Foxconn to Double China Factory-Worker Salaries After Suicides
June 06, 2010, 4:12 PM EDT
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By Tim Culpan and Janet Ong
June 7 (Bloomberg) — Foxconn Technology Group, manufacturer of Apple Inc. iPhones and Hewlett-Packard Co. computers, said for the second time in less than a week that it will raise employee wages, more than doubling base salaries at its Shenzhen factories within four months, after being criticized for contributing to worker suicides.
Foxconn will boost monthly pay for most plant workers to 2,000 yuan ($293) from 1,200 yuan effective Oct. 1, the Taipei- based company said in an e-mailed statement late yesterday. Foxconn, also known as Hon Hai Group, on June 2 raised base pay from 900 yuan, effective immediately.
Foxconn was criticized by labor groups for putting profit ahead of employee welfare after at least 10 workers committed suicide this year, prompting Chairman Terry Gou to open factories to the media and apologize. Apple Chief Executive Steve Jobs last week said the suicides were “very troubling” and said his company is “all over” Foxconn to resolve the issue.
“The pay rise is even more than we would have expected, it’s crazy,” said Calvin Huang, who rates Foxconn’s Taipei- listed flagship Hon Hai Precision Industry Co. “buy” at Daiwa Securities Group in Taipei. “Their clients must be required to absorb this too.”
Huang cut his six-month share price estimate for Hon Hai Precision to NT $144 from NT$180 after last week’s 30 percent pay increase was announced. Morgan Stanley lowered its estimate to NT$150 from NT$168 and kept an “overweight” rating following the earlier wage rise, while Goldman Sachs Group Inc. cut it to NT$156 from NT$188 and kept a “buy” rating on the stock.
‘Dignity of Workers’
Foxconn spokesman Edmund Ding declined to comment on what effect the wage rises will have on Foxconn’s earnings or clients. More than 400,000 workers will be affected by the pay rise with overtime hours worked by employees likely to decline after the higher wages are implemented, he said.
“This wage increase has been instituted to safeguard the dignity of workers, accelerate economic transformation, support Foxconn’s long-term objective of continued evolution from a manufacturing leader to a technology leader and to rally the best of our workforce,” Gou said in his statement. “We recognize our responsibility as a global leader in electronics manufacturing, and take this responsibility very seriously.”
The higher base wage will be effective after a worker passes a three-month evaluation period, Foxconn said in its statement. Further pay raises for current line-leaders and supervisors will be determined by Aug. 1, while wage increases for factory workers in other parts of China to be determined according to local conditions and announced from July 1, it said.
“The company remains a typical sweatshop, as are all factories that overlook the basic needs of their workers for the sake of profit,” China Labor Watch wrote in a June 3 statement. Gou and Jobs have both denied Foxconn is a sweatshop.
At least 10 Foxconn workers have died from suicide, five during May, with three more attempts, according to the company. Foxconn hired counselors, monks and opened help lines to assist workers after the deaths.
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