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Update on the current status of workers dismissals at the factory PT Panarub Dwikarya Benoa in Indonesia

October 24, 2012

Herzogenaurach, 24 October 2012 - In our previous statement, posted on August 14, 2012, we outlined adidas Group’s efforts to help find a resolution to the dispute between a local trade union, SBGTS, and PT Panarub Dwikarya Benoa (PDB), a subcontracting factory making products for one of our business partners in Indonesian. The crux of the issue is that following an 8 day strike in July 2012, 1059 workers were asked by the factory not to return to work. The factory management had judged the strike to be ‘illegal’ and, given the workers extended leave of absence, treated them as though they had “resigned”. Of the 1059 workers initially impacted by this decision, 287 have formerly resigned and accepted a final payout, while 772 remain uncertain as to their future.

It is our view that the legality of the strike and the employment status of the workers can only be determined by a properly constituted court. However, for this matter to go before a court the local union must formerly lodge a complaint with the Manpower Department. This is yet to happen. In the absence of any action by the union, we have asked that the factory management to take positive steps and seek mediation with SBGTS. Three months have passed and the majority of the workers who participated in the strike remain suspended, without pay, and without any resolution to their employment status. We have repeatedly called on the factory management and the SBGTS to agree on approach to resolve the dispute, or follow the legal channels available to them through the Indonesian Labour Court.

Having seen so little progress, in early September 2012 we wrote to the factory management, the trade union and to the Ministry of Manpower urging all parties to take concrete steps to find a resolution to the case. Recently we have been encouraged to see senior officials from the Ministry of Manpower and members of Indonesia’s House Representatives visit the factory to review the situation. However, despite this high level intervention, we have yet to see either party set aside their differences and enter into a formal mediation.

As time passes and frustrations grow we are seeing more extreme actions taking place on the ground. During a recent demonstration at the plant, union members and their supporters clashed with fellow factory workers and with PDB’s security guards, resulting in injuries. And in a separate incidence, we recently sought to intervene in a case where a disgruntled female worker was arrested and temporarily imprisoned due to a bomb threats directed at the factory. We cannot condone threats, or violence, and we have urged all parties to remain calm and abide by the law.

Given the failure of the parties to heed our call for dialogue, we have taken the initiative and approached the Indonesia Mediation Center to help move the process along. A mediator from the Centre has reached out to the two parties, to ask them to enter into a managed mediation, one that would be binding. Both parties have agreed to speak independently with the mediator. We are hopeful that our latest efforts results in a timely resolution to this case and we are monitoring this closely.

adidas Group has no direct commercial relationship with PDB, which acts as a subcontractor for our business partner, PT Panarub . Currently we have no subcontracted orders with PDB, and until such time we see a final resolution for this case, we will not permit any of our orders to be placed in this factory.