More on Hon Hai's China fiasco

Bruce Einhorn

Some advice for Terry Gou, the chairman of Hon Hai, the giant Taiwanese electronics company: Hire a flak. And make sure it's a good one. You're a billionaire and one of the richest men in Taiwan, so you can certainly afford the best. And you certainly need the help. Your company, which manufactures iPods for Apple and counts Dell, Nokia, and Sony among its other customers, created a major PR disaster over the past week following news that a Hon Hai subsidiary had sued two Chinese reporters - but not their newspaper - for their critical coverage of working conditions at a Hon Hai factory in China. When the Chinese media, both traditional and online, started beating up on Hai Hai, your company had to retreat quickly and withdraw the lawsuit.

That's left some people wondering who's giving you advice. I spoke to one exec from a big multinational that outsources production to Hon Hai (can't use the name, unfortunately) who says he was "shocked" by your company's decision to sue the reporters. "It was a blunt reaction to a fairly dicey situation and wasn’t very well thought at all," he says. "You are basically just playing with fire." Like many other Taiwanese companies, Hon Hai traditionally hasn't paid much attention to PR since it needed to keep a low profile to avoid overshadowing its brand-name customers. But Hon Hai is now the No. 1 electronics manufacturer in the world and laying low and avoiding the press just doesn't work anymore. "To have such a PR disaster blow up in their face shows their inexperience," this exec says. "The backlash it created was intense. They were flat-footed - they didn’t realize what the playing field was like in the international market."

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