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Nike severs ties with four factories

Reuters - September 22, 1997

Martin Wolk, Portland – Nike Inc. said Monday it severed ties with four Indonesian-based factories because they failed to adhere to the company's requirements for wages and working conditions.

Speaking to shareholders at the company's annual meeting here, Nike officials defended the sports apparel giant against renewed criticism of its Asian factory labor practices and outlined plans to expand sales of its soccer, golf and women's footwear.

Nike said the move involved three subcontractors, who manufactured products for Nike and other clients at four factories in Indonesia.

Nike said it severed its relationship with one of the subcontractors, which it identified as Seyon, because the company refused to meet a 10.7 percent increase in the monthly minimum wage, as mandated by the Indonesian government in April.

Nike spokesman Vada Manager called Seyon "a good company" and said Nike could sign a new contract next year if the Indonesian company meets the wage requirement.

Manager declined to identify the other three factories but he said Nike chose to end its relationship with them because they failed to comply with Nike's standards for overtime and physical environment.

The company said at one of the factories the average work week was 60 to 70 hours.

The announcement came as a workers' rights group accused Nike of contracting with companies in China that use child labor.

In a lengthy statement, Nike challenged the allegations made about four Chinese sub-contracted factories by a group called Global Exchange.

"The report incorrectly states the wages earned by workers, makes irresponsible accusations about worker health and safety and is just plain wrong in its assertion that Nike's Code of Conduct is not made available to workers," said Dusty Kidd, Director of Labor Practices for Nike.

"These are not new issues," Nike Chairman Phil Knight told shareholders. "We try to be good citizens and operate as good a factory as we can."

Separately, Nike President Tom Clarke confirmed the company's growth rate would slow down in the current fiscal year, reflecting weaker U.S. footwear sales. He said Wall Street estimates that called for a profit of $2.80 a share for the current fiscal year were reasonable. Nike reported a profit of $2.68 a share for the fiscal year ended May 31.

Clarke also said in an interview after the company's annual meeting here the outlook for fiscal 1999 was "very positive."

He said the company will overcome its current difficulties in U.S. footwear sales and over the long term would continue to expand the category by seven to 12 percent a year.

He reiterated the company expects U.S. footwear sales to decline by less than 10 percent over the next two to three quarters from the year ago periods.

Nike shares ended up $1.0625 at $55.375 in New York Stock Exchange trading.