Response to the report "The Life of Football Factory Workers in Thailand" issued by Thai Labour Campaign and CCC

Herzogenaurach, 30 June 2006 - The report makes reference to two football manufacturers Molten Thailand and Mikasa Thailand, and to a plastics manufacturer Molten Asia Polymer Products. We have read through the report with some care and have set out below our responses to the issues and concerns raised with respect to Molten Thailand.

Molten Thailand is Japanese owned and managed and produces ball products for adidas, as well as for its own 'Molten' brand. Molten was selected as the supplier for the match ball of the FIFA World Cup 2006™. The company employs a total of 960 workers of whom 150 are directly involved in the manufacture of the +Teamgeist football. This takes place in a dedicated production building.

We are disappointed that TLC - whom adidas has openly engaged with in the past - did not contact us beforehand and request direct access to the factory. Instead the authors of the report have relied on information collected through a small number of off-site worker interviews. As a result, the report contains many inaccuracies and draws a misleading picture about the factory.

It is important to state that in recent months Molten Thailand has been the subject of numerous work place inspections conducted by local authorities, staff of the adidas Social & Environmental Affairs team and visits by international media. The media directly interviewed workers about working conditions in the factory and their living conditions. Furthermore, in April 2006 the factory was visited by independent social auditors who were commissioned by a German consumer organisation to inspect and assess the factory in accordance with core labour, health, safety and environmental standards and to evaluate the social responsibility of the management. As a result of that inspection, the factory was given a high performance rating.

We would reject the notion that the Molten Thailand workers’ rights to form a trade union are being repressed. This is not borne out by the many hundreds of worker interviews our compliance team has conducted in the past 5 years, nor has these been found in the independent monitoring that has been carried out at this plant. There is no “atmosphere of repression”, or union-busting activities in evidence at Molten Thailand. To infer this from the situation at other unrelated plants, does not lend credibility to the argument. The fact that there is no existing or established union within the factory reflects a situation that is widespread in Thailand. Less that 4% of the country’s work force are unionised; with State enterprises being the sector with the largest number of active trade unions.

What we can say is the factory has a very active Welfare Committee, with elected worker representatives. Welfare committees are not an alternative to a trade union and they cannot negotiate and enter into collective bargaining agreements. They do however support better worker-management communication and are mandated by Thai law. Worker representatives from the Welfare Committee have participated in independent, NGO-run, training on trade union rights.

The report is correct in stating that Molten Thailand employs both permanent workers and contract workers. It goes on to state that “the regular workers and sub-contract workers are treated differently”. To be clear, both permanent and contract worker receive the same legal entitlements in terms of pay, annual leave, sick leave, and benefits, including social security. Permanent workers however receive higher monthly incentive payments and end of year bonus payments. Monthly bonuses are designed to encourage full attendance, which is common practice in Thai factories. Such a practice is not, as the report suggests, a disciplinary policy where late attendance is penalised. We would agree with the report that asking the contract workers to pay for their uniform shirts is unreasonable and unacceptable. The factory has committed that the Contractor will stop such deductions.

The report states that working hours are “compulsory”. This is not correct. Workers are given a choice and overtime is voluntary. Also the report incorrectly states that the day shift workers work until 7.35 pm; their shift ends at 6.30 pm.

The report sets out various figures for worker salaries. The current minimum wage in Chonburi, where the factory is located, is 166 baht per day. The average wages of the permanent and contract workers in Molten Thailand are 260 baht and 173 baht per day, respectively. Both contract and permanent workers are also eligible to receive monthly bonuses, based on attendance and work performance. These bonuses contribute a further potential income of between 600 to 750 baht per month. In addition to regular wages and overtime, permanent workers also received an annual bonus. The annual bonus in 2005 was a 3 month bonus plus 3,000 baht.

The report calls for further improvements to wages, especially for the contract workers. In response we would offer two observations.

Firstly, as is universal practice, the minimum wage is established by the Government. The Thai Government has recognised that minimum wages have not kept pace with consumer prices and inflation and have made three adjustments to wages in the past 18 months. We understand that further increases are pending.

Secondly, it is adidas policy to actively discourage the use of temporary or contract labour in the supply chain and we have continued to push the Molten Thailand management team to reduce its dependence on contract workers in their factory. We believe that long term improvement in pay for the contract workers is best achieved by having them become permanent employees, with increased job security and annual bonuses.