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Adidas Supplier in Vietnam Laying Off Thousands of Workers

A Vietnamese subsidiary of one of the world’s largest casual and athletic footwear manufacturers is poised to lay off another 5,700 of its workers after axing more than 2,300 of them in February.

In a notice submitted to the Taiwan Stock Exchange, Taiwan-based Pou Chen, whose clientele includes big-league names like Adidas and Nike, blamed the “uncertainty of the near-term operating environment,” along with the need to adopt a manufacturing capacity “diversification strategy,” for the dismissals at Pouyuen Vietnam Co. in Ho Chi Minh City.

Local media fingered plummeting orders at the supplier, which employed nearly 45,000 people last March, according to Pou Chen’s more recent update in the Open Supply Hub, a collaborative supply-chain mapping platform.

VNExpress, which reported on the reductions on Saturday, said that workers will be laid off in two “batches,” the first in mid-June with 4,500 people and the second in early July with another 1,200.

Altogether, Pouyuen will be shrinking its staff by more than 17 percent in the first half of the year alone.

While Pou Chen’s stock exchange note said that the dismissals will have a “relatively limited impact compared to the company’s overall workforce,” which spans Bangladesh, Cambodia, China, Indonesia, Myanmar and Taiwan in addition to Vietnam, VNExpress wrote that “this is considered the largest reduction in labor since Pou Yuen has been operating in Ho Chi Minh City since 1996.”

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But it appears that the footwear factory was trying to avert this. From December to February, Pouyuen asked 20,000 workers to take alternate Saturdays off in response to idling lines.

Pouyuen’s buyers, according to supplier lists and shipping data, include Asics, Adidas, Puma, New Balance, Reebok and Timberland.

Pou Chen, which did not respond to a request for comment, wrote in its note that “all personnel matters will be handled in accordance with local laws and regulations.” VNExpress said that the terminations won’t include employees who are pregnant, on maternity leave or raising children under a year old. Neither will they affect low-income earners and workers with disabilities. The outlet reported that workers will receive 0.8 month’s salary for every working year.

A spokesperson for Adidas, which labor campaigners accused of being slow to push for the reinstatement of ousted union leaders at Pou Chen’s Myanmar operations, told Sourcing Journal that it is in “close contact” with Pouyuen to ensure that any downsizing follows local laws as well as its own established guidelines and workplace standards. “We have also ensured that union representatives were involved in the process to support the workers,” the representative said.

Puma said that it and Pou Chen came to a mutual agreement to stop business in early 2022, though it remains committed to Vietnam. VF Corp., Timberland’s parent company, declined to comment, citing a quiet period ahead of its earnings report next week. Asics, New Balance and Reebok did not reply to emails seeking information.

Labor advocates, including those at the Worker Rights Consortium, are keeping a close eye on the proceedings, particularly whether affected workers will be paid what they’re owed.

“Without knowing this it’s hard to comment, but I can say that the company must ensure that it is at the very least paying workers their legally mandated benefits as they are being suspended and terminated, and international brands with longstanding relationships with the parent company equally have an obligation to ensure that workers who have produced their shoes have their basic rights protected and that everything is done to [help] workers find alternate employment,” Thulsi Narayanasamy, director of international advocacy at the Washington, D.C.-based watchdog group, told Sourcing Journal.

Textiles and garments, Vietnam’s second-largest export earner after smartphones, have been badly battered first by Covid-19, then by the global downturn. According to Vietnam’s General Statistics Office, garment exports from the country tumbled by 17.4 percent to $7.2 billion in the first quarter of 2023 compared with the year before. The U.S. Commerce Department’s Office of Textiles, a.k.a. OTEXA, reported an even steeper drop in footwear exports to the United States, which fell by a year-over-year rate of 23 percent to 1 billion pairs from January to March.

Data from shows a similar slide for Pouyuen’s shipments, which numbered 915 from January to April 2022 but only came up to 181 in the same period this year.

Exports from Vietnam to the United States are also facing intensifying scrutiny under the Uyghur Forced Labor Prevention Act. The country is heavily reliant on cotton from China, which poses a significant risk since Xinjiang produces 90 percent of the fiber. Of the 678 garment and footwear shipments that U.S. Customs and Border Protection detained since June, nearly 40 percent of them—that is to say, 266, valued at $13 million—were from Vietnam. Of the stopped cargo, just 34, valued at $1 million, were ultimately released.