May 26 (Bloomberg) -- Apple Inc., Hewlett-Packard Co. and Dell Inc. said they’re investigating working conditions at Taiwan’s Hon Hai Group after a mounting number of suicides at their contract manufacturer.
Apple is “saddened and upset” by the suicides and has a team evaluating Hon Hai’s countermeasures, said Steve Dowling, a spokesman at the Cupertino, California-based maker of iPhones and iPads. HP said it’s investigating Hon Hai’s practices and Dell said it’s examining reports on the world’s largest contract manufacturer, also known as Foxconn Technology Group.
The probes add to the pressure on billionaire Chairman Terry Gou, who today opened Hon Hai’s biggest Chinese production site to the media to defend working conditions that some labor-rights groups describe as a “sweatshop.” The fallout threatens to disrupt a $40-billion-a-year operation that builds everything from iPhones to desktop computers and televisions.
“Hon Hai needs to resolve the issue because the situation is also negative for Apple and HP,” said Allen Pu, an analyst at Fubon Securities in Taipei who recommends investors “add” shares of Hon Hai Precision Industry Co., the group’s flagship. “Clients may reallocate some orders to other manufacturers, though I still see Hon Hai keeping its role as the main supplier because no one else has such sizeable operations.”
The chairman’s opening of the manufacturing facilities highlights the scrutiny the company is facing, according to UBS AG analyst Arthur Hsieh.
Never Seen Before
“This has never been seen before, it’s really unusual times,” said Hsieh, who’s based in Taipei. “It’s crisis control.”
There were nine suicides and two attempts at the Chinese operations this year, a Hon Hai official said yesterday, declining to be identified. At least four of the deaths occurred this month.
“We’re in direct contact with Foxconn senior management,” Apple’s Dowling said. “Apple is deeply committed to ensuring that conditions throughout our supply chain are safe and workers are treated with respect and dignity.”
HP is investigating “the Foxconn practices that may be associated with these tragic events,” the Palo Alto, California-based computer maker said in an e-mail.
“Any reports of poor working conditions in Dell’s supply chain are investigated,” Jess Blackburn, a spokesman for Round Rock, Texas-based Dell, said in an e-mail. “We expect our suppliers to employ the same high standards we do.”
Dell fell 8 cents to $13.25 at 4 p.m. New York time in Nasdaq Stock Market trading. Apple declined $1.11 to $244.11. HP dropped 13 cents to $45.72 in New York Stock Exchange composite trading.
Gou, who says he hasn’t slept well in the past month, loaded journalists aboard a fleet of five buses to tour the Longhua campus in Shenzhen, southern China, as the family of Ma Xiangqian, one of the deceased, looked on from the south gate. The parents, who say Ma didn’t kill himself, knelt on the ground crying, holding on to a framed picture of their dead son.
Inside one of the factory buildings, rows of workers wearing white jackets, caps and blue slippers assemble motherboards in an area the size of an American football field.
“Most of the workers here are young so there are lots of boy-girl issues,” said Huang Lixia, 25, who supervises a line of 35 people.
Most of the problems involve new workers, Chen Zhonglei, 30, who manages 200 workers that assemble printers, said from a help center inside the campus.
“These young workers coming in now are not as ready to take on hardship as much as I was when I arrived,” said Chen, who’s worked at Hon Hai for a decade. “Psychologically they’re more fragile. When I started I didn’t think about so many things.”
Foxconn is a sweatshop that “tramples” workers’ personal values for the sake of efficiency, Li Qiang, executive director of New York-based China Labor Watch, wrote in a May 21 statement. Gou on May 24 said his company isn’t a sweatshop.
Suicides among Chinese factory workers have more than doubled in the industrial south this year, compared with all of 2009, Li wrote in a report today, citing a survey of 201 workers. The survey excludes the deaths at Hon Hai.
“Foxconn may not be a sweatshop in the sense that it physically abuses its employees or forces them to work extra hours,” the China Daily Newspaper wrote in an editorial today. “That does not mean it is showing enough humanitarian concern for its employees. And, neither does it imply that it is doing enough to foster a corporate culture that helps employees strike a healthier work-life balance.”
Students and Scholars Against Corporate Misbehavior, a Hong Kong-based organization that monitors corporations, said yesterday it will ask consumers to boycott the next iPhone as Apple should share the blame because it hires contract manufacturers such as Hon Hai to make its products.
Gou said he plans to increase psychological testing to help prevent more suicides.
“I offer my sincerest apologies to society, the entire public, all our employees and their families because we had no way of preventing these things from happening,” Gou said as he bowed at a press conference today. “Will it happen again? From a logical, scientific standpoint, I don’t have a grasp on that.”