2nd UPDATE: Hon Hai To Discuss Raising Prices With Clients
21 Luglio 2010 - 5:14PM
Dow Jones News
Electronics manufacturer Hon Hai Precision Industry Co.
(2317.TW) will discuss raising product prices with clients to
offset planned wage increases for its employees, Executive Vice
President C.L. Huang said during a news conference Wednesday.
Wage increases in China at Hon Hai and other firms have helped
fuel speculation that companies could increasingly shift their
manufacturing operations from China to other countries. A spate of
employee suicides at Hon Hai, along with labor protests at other
companies, has also drawn international scrutiny of the working
conditions at factories in China.
Huang's comments came after Hon Hai's chairman, Terry Gou, in
early June played down the impact of its wage increases and said it
was accelerating automation to reduce its reliance on labor, while
the company's Hong Kong-listed subsidiary, Foxconn International
Holdings Ltd. (2038.HK), announced it would conclude price
negotiations for its products with clients in the third quarter to
mitigate the impact from the wage increases.
Huang said the extent of the price increases will differ
according to the client or product. However, the company has yet to
arrive at a definitive plan because the wage increases won't take
effect until Oct. 1, she said.
Hon Hai, which uses the trade name Foxconn, assembles iPhones
and iPads for Apple Inc. (AAPL) and mobile phones for Nokia Corp.
(NOK)
In the first five months of this year, 10 employees at Hon Hai's
400,000-worker Shenzhen operation jumped to their deaths in
separate incidents, prompting the company to take a series of
measures to improve conditions, including large-scale wage
increases in June.
Recent wage increases in China have also affected companies
including Yum Brands Inc. (YUM), Honda Motor Corp. (HMC) and Toyota
Motor Corp. (TM). Labor costs this year have risen between 20% and
25% in the Pearl River Delta and the Yangtze River Delta, two major
manufacturing regions that extend inward from China's east coast, a
spokesman for China's Ministry of Industry and Information
Technology said earlier this week.
Hon Hai held an emergency press conference Wednesday, after a
worker Tuesday fell to his death at a southern China factory of its
affiliated company, Chimei Innolux Corp. (3481.TW). Huang said
Chimei Innolux operates independently, but Hon Hai has drawn
criticism from the Taiwanese media.
"We are now struggling on whether to invest more on Taiwan or
not," Huang said, "We really love Taiwan, but any of our moves seem
to spark criticism here."
As part of the efforts to offset the wage increases and to meet
growing demand for its products, Huang said the company is now
evaluating as many as four expansion projects in China's inland
regions.
In late June, China's state-run Xinhua News Agency reported that
Hon Hai would set up a new plant in Zhengzhou city, capital of
Henan province. Xinhua quoted a spokesman with the municipal
government and an official with the provincial employment promotion
department.
Separately Wednesday, workers at a southern China factory owned
by Japanese firm Omron Corp. (6645.OK) went on strike and demanded
higher salaries, Xinhua reported, in the country's latest instance
of labor unrest.
An undetermined number of workers at Omron (Guangzhou)
Automobile Electronics Co.'s factory in Guangzhou staged a walkout
to pressure the company to raise their monthly salaries to CNY1,800
each from CNY1,300 ($191), Xinhua said, citing local sources,
adding Omron supplies electronic components to Honda and
Toyota.
The company's management is in negotiations with workers, the
sources were cited as saying. A spokesman for the Omron plant said
it was unknown if the strike would affect production by customers
like Honda, according to Xinhua.
In a sign of official concern about labor protests, South
China's Guangdong province Wednesday reviewed a draft of the
country's first law covering labor disputes and wage negotiations
amid efforts to ease labor tensions in the country, according to
another Xinhua report.
One of the major purposes of the revised draft of the Regulation
on the Democratic Management of Enterprises in Guangdong is to
establish a legally binding wage negotiation mechanism, Xinhua
said. Among the regulation's 83 articles, 25 concern wage
negotiations.
The draft law says the relevant union should organize wage
negotiations between elected worker representatives and the
employer when more than a fifth of workers demand a pay rise.
If the employer refuses to hold or join wage negotiations, the
workers would be entitled to stop working and the employer
shouldn't fire them for doing so, according to the draft law,
Xinhua reported.
The regulation is the most comprehensive labor law in China, Liu
Mu, head of the labor law department of the standing committee of
the Guangdong Provincial People's Congress, was cited as
saying.
"It will establish a mechanism so workers can legally voice
demands for pay raises."
-By Ting-I Tsai and Owen Fletcher, Dow Jones Newswires; 8610
8400 7702; owen.fletcher@dowjones.com
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