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Inditex Suspends Links With Providers After Bangladesh Blaze

Inditex SA (ITX), the world’s largest clothing retailer, said it stopped doing business with two subcontractors after garments with the company’s labels were found at the site of a fatal factory fire in Bangladesh.

Seven people died in the Jan. 26 blaze at Dhaka’s Smart Export Garments Ltd., according to the fire department. Garments from Inditex’s Bershka and Lefties brands were found in the wreckage, the Institute for Global Labour and Human Rights said on its website.

The blaze was the second major fire at a Bangladesh clothing factory in two months and is prompting labor groups to renew calls for better conditions at factories supplying the world’s biggest brands. More than 100 people were killed on Nov. 24 at a local plant producing clothes for companies including Wal-Mart Stores Inc. (WMT)

While the impact of the blaze on Inditex’s reputation may be limited, “this is still a warning call to the business,” said Francisco Salvador, a Madrid-based strategist at FGA/MG Valores. “In the last few years, the company has started to find an increasing chunk of its suppliers in countries close to the western world as a way to prevent these kind of situations.”

More than 700 garment workers have died since 2005 in Bangladesh, according to the International Labor Rights Forum, a Washington-based advocacy group.

International Brands

Europe’s richest man Amancio Ortega founded Inditex, whose brands include Zara and Massimo Dutti.

Inditex has stopped doing business with Spanish supplier Wonnover and its Bangladeshi sub-contractor Centex as a precautionary measure, Inditex spokesman Jesus Echevarria said in a telephone interview. Both companies deny handing off production to unauthorized suppliers and Inditex has sent its own investigators to the scene, he said.

Smart Export wasn’t licensed by the fire department, Mohammad Mahbub, a director of the Bangladesh Fire Service and Civil Defence, said in a telephone interview. Mahbub, who is part of a four-member panel investigating the fire, said today that the death toll has risen to seven.

Surging wages and inflation in China, the largest apparel supplier, have prompted global retailers to shift production to Bangladesh. In response, an $18 billion manufacturing industry has sprung marred by factories operated in buildings with poor electrical wiring, an insufficient number of exits and little fire-fighting equipment.

Mahbub said his team did not find any fire extinguisher or equipment at the factory during an inspection after the latest blaze.

Smart Export employees died either after jumping out of windows or in a stampede, Abdul Halim, a deputy assistant director of the fire Service, said on Jan. 26.

The government, garment association and western retailers “need to act rapidly to stop the killings and to ensure a safe workplace for our workers,” said Kalpona Akter, executive director of the Bangladesh Center for Worker Solidarity in an e- mail.

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net

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