Adidas Factories

Nov 3rd, 2006, in Business & Economy, IM Posts, by

Three Adidas shoe factories in West Java close down.

PT Dong Joe Indonesia and PT Spotec, two Korean owned firms licensed by the Adidas Group to produce Reebok and Adidas shoes in Indonesia, have closed down due to financial difficulties and problems experienced in acquiring credit for the purchase of raw materials for production, as announced by the chairman of the Asosiasi Persepatuan Indonesia (Aprisindo), Indonesian Shoe Association, Eddy Widjanarko, in Surabaya, East Java. [1] A third firm, PT Tong Yang Indonesia, located in Bekasi will also cease production shortly, according to the Jakarta Post.

Eddy claimed that the two Korean owners sincerely wanted to stay in operation but that the financial situation of both was critical. He went on to say that the factories had not increased their prices, at five dollars per pair, for their Reebok branded shoes in five years, while at the same time production costs kept rising. Both businesses had attempted to find new investors but had failed.

The Adidas Group, said Eddy, was a hard taskmaster and insisted on the five dollar per pair price. If the price could not be provided by Indonesian producers then there were plenty of Chinese and Vietnamese factories that could satisfy them.

Thousands of workers have been put out of work, about 6000 at PT Dong Joe and 4500 at PT Spotec. Between the two firms a total of 1.3 million pairs of shoes were manufactured per month. The owner of both companies has already left the country and a team is currently looking at ways to restructure the companies and breathe new life into them. The government is currently working with the Korean embassy to contact the owner and remind him of his responsibilities to his workers. [2]

Meanwhile the workers of both firms are petitioning the mayor to seek a method of keeping the factory, opened in 1990, running. The company's manager, Harold Kussler, has vowed that employees will not be retrenched, and claims that there is simply a conflict among the shareholders. [3]

15th January 2007. PT Tong Yang Indonesia has received an order for 250,000 pairs of shoes from Boss according to Ansari Bukhari, of the Directorate General for the Textiles industry, enabling it to stay in business. [4]

The other two firms, PT Dong Joe Indonesia and PT Spotec, are currently seeking new investors from China, Taiwan, and South Korea, companies that seek to rent the two firms' factory facilities, but this is dependent on approval from creditor banks, Bank BRI dan Bank Mandiri.

Meanwhile Industry minister Fahmi Idris said that the original reason for the three companies failures was that when Reebok was taken over by Adidas the latter viewed products from the three as being not of the highest quality.

16th April 2007. The 6,830 workers of the PT Dong Joe Indonesia (PT DJI) Reebok factory in Tangerang were formally laid off yesterday after having been idle for the last five months. The lay offs were agreed upon by company management, the labour union, and the Tangerang State Court. The company is now said to owe almost 100 billion rupiah, or about one million dollars, in unpaid wages and severance pay.

Harold Kussler, the Factory Manager, said:

There's no way out for PT Dong Joe.

Previously in December 2006 the court had declared the company bankrupt and thereafter Bank Rakyat Indonesia was appointed to auction company assets between March 21st and May 21st this year, which include the company's land, buildings and machinery.

The owners, Mr Cheon and Mr Kim Ck, have not returned from South Korea since October last year. [5]


11 Comments on “Adidas Factories”

  1. avatar Andrew says:
    November 4th, 2006 at 10:24 am

    Aha! now I know how much “overhead” is being added on the journey between the factory to the retail store.

  2. avatar Bradlymail says:
    November 4th, 2006 at 10:25 am

    When I went to Adidas Boutique in Singapore I bought two pair of Adidas t-shirts, each cost about $50 sgd. Without knowing to me that Adidas t-shirts were made in Indonesia. I was really shocked but really proud that Adidas were locally made in Indonesia.

  3. avatar Orang kampung says:
    November 5th, 2006 at 10:26 am

    I think government should maintain control of FDI, it happened with nike stores before. They can’t just go like that. Multinational corporations (MNCs) with the nature of gloablization find a great advantage in the game because they make developing countries to beg for their investment and lower their price”¦ I guess little bit of government control will be good!

  4. avatar Riccardo says:
    November 5th, 2006 at 10:26 am

    The key issues here all involve COMPETITIVENESS. Mr. O.K., when you say more government control, I guess you mean like more control of workers (unproductive too many violent demos) and slimy, leech bureaucrats (too many bribes, creating “high-cost economy”) that fleece and extort these medium-sized Korean businesses. We don’t need more regulations on businesses. There needs to be more control of unproductive, violent workers and corrupt officials.

    Indonesian workers continue to violently demand more money and benefits and yet, their productivity is far too low (eg. on average, Vietnamese workers can produce 6 shoes/hour and Indonesian workers only 1.5/hour “” the same goes for China and other ASEAN countries).

    Medium-sized foreign companies, like these Korean-managed shoe factories, have been really getting screwed in the last 8 years. Local gov’t officials have created way, way too many fees and regulations, only designed to be nothing more than cash cows for their own personal wealth. Corrupt tax, customs, PLN and trade officials seem completely unashamed to demand billions of rupiah in bribes from these foreign businesspeople.

    AND the result is 10,000 Indonesians lose their jobs (of course now they will have a big riot demo and global investors will see it on CNN and say “We’ll never open a business in Indonesia.”)

    AND yet, the corrupt officials have bought a new villa and a new Mercedes and LAUGH all the way to the mosque.

    Bradlymail, why would you be “proud” that Adidas stuff is “made” in Indonesia?

  5. avatar Andrew says:
    November 7th, 2006 at 10:28 am

    The Indonesian government should make it a first priority to educate the workforce – maybe they should establish, at the state level, a committee whose task is to disseminate all facts concerning our (in)ability to compete at the global level, and educate the masses about the consequences of protesting without limit.

    These workers don’t care (maybe it’s because they are not aware of the stiff competition) about the long term, all they care about is easy money. No such thing as a free lunch. Everyone must fight and sacrifice. That’s what everyone does in Vietnam & China (and a lot other emerging countries).

    Unfortunately, I should say, a lot of government officials are so corrupt it would be very tough to ask the workers to work hard & sacrifice.

    Indonesians in general have the reputation of not wanting to work hard, and this probably has something to do with the education we get in elementary school: “Indonesia kaya raya adil makmur berlimpah ruah”. So I believe it should start at a very young age. Unfortunately, some try to plant the seed of religious and ethnic hatred instead.

    The poor kids wouldn’t know which way is right which way is left. IRONIC.

  6. avatar B.K.Asamoah says:
    March 16th, 2007 at 8:46 am

    We are interested in Joining them as partners. How do I get in touch with the Korean owners. I live in Seoul.

  7. avatar summerstorme says:
    March 2nd, 2009 at 1:22 am

    The way I see it, this is a vicious cycle that one party must stop. The lower the prices at cost, the worse the economy. If suppliers do not make a stand and continue to let the “brands” rule by pushing price down, then eventually, many more suppliers will have to close down. “Brands” must also think abt how forcing suppliers to meet target price. Yes, there are so many pros for the company BUT how does that little ripple affect the ecomony from a bird’s eye view? This macro, not micro. Suppliers earn lesser and thus have lesser $$ to work with. Long run, this doesn’t work. Short term is fine but long term commitment into this will drive suppliers 6 feet under ground. Do you know that MNC push mid size suppliers for 45 – 60 days payment terms (previously @ 30-45days)? Most middle sized set ups are not able to handle this with constantly lower fob prices. Eventually, something has to give – quality. So who’s really to blame? There’s a saying, you pay peanuts and you get monkeys!!!

    If we, the consumers are paying the price for the item, why is it that only the Brand takes majority of the profits? if suppliers have no $$ to get raw materials = no $$ to pay workers = workers lose jobs = ppl no buying power = country economic crisis = more brands forcing suppliers to reduce cost = more suppliers not able to meet ends meet and it goes on and on until it becomes a global ecomomic crisis.

    So bottom line, who caused the crisis? “We” that were greedy for more profits without thinking how the little ripples will affect “us” as a whole. “we” have not been ethical or practiced good moral standards but been disillusioned by biz profits and circumstantial competitiveness.

  8. avatar Harland Kenneth Richard says:
    March 23rd, 2010 at 8:28 pm

    Dear Sir/Madam,

    I represent a group of company based in united kingdom and Middle east we are currently seeking means of expanding and relocating our business interest in the following sectors:banking,real estate,stock speculation and mining,transportation and tobacco.If you think you have a solid background and idea of making good profit in any of the mentioned business sectors in your country.

    please write me for possible business co-operation.Moreso,we are ready to facilitate and fund any business that is capable of generating 10% annual return on investment(AROI).JV patrnership and loan financing can also be considered.

    Looking forward for a possible business collaboration with you.

    Harland Kenneth Richard

    Best regards,

    Private E-Mail:hkr@consultant.com

  9. avatar warayuphat says:
    June 9th, 2010 at 4:51 pm

    Hi,

    I am JJ from Pan asia Leather co.,Ltd. Thailand
    I would be happy if We can join business soon.

    Could you tell me please if I will visit you at Indo?

    Agenda: present Company Profile and Capacity for ADIDAS

    Please conteact to me directely.

    Best Regards,
    JJ

  10. avatar nina says:
    March 21st, 2011 at 2:42 pm

    ahahahahah :) ahahahaah i am p.l from Australia ADIDAS is the best hehehe
    i LOVE it my caberd is full of it

  11. avatar Edwin Martin says:
    October 5th, 2011 at 10:16 am

    Good morning dear friend.
    My name Edwin from UK, i working in United kingdom embassy in Singapore but right now i’m in Indonesia, i wan to let you know that i’m intresting to invest into your company in Indonesia.

    Please kindly get back to me as soon as you receive my email thanks.

    From Edwin Martin UK.



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