TOPICS > Economy

Hanesbrands Relocates Manufacturing to Asia

February 19, 2009 at 6:25 PM EDT
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Hanesbrands underwear company has closed 30 plants in North and South America, putting thousands out of work, while relocating its factories to Asian countries. Jeffrey Kaye of KCET-Los Angeles reports.

JIM LEHRER: And next, the story of one company’s tough business decisions. Special correspondent Jeffrey Kaye has that report.

JEFFREY KAYE, NewsHour Correspondent: At a new factory in Vietnam owned by the American underwear company Hanesbrands, workers are turning out men’s briefs to be sold in the United States.

This plant in Wei, in central Vietnam, is one of the firm’s five new Asia factories, two in Vietnam, two in Thailand, and one in China. Hanesbrands’ Asia facilities opened in the past two-and-a-half years employ about 6,000 people.

JAVIER CHACON, Vice President, Hanesbrands, Inc.: Vietnam has, you know, a good labor force, you know, good labor costs, you know, good infrastructure, good energy costs, and it is convenient for our fabric location in China.

JEFFREY KAYE: Javier Chacon is Hanesbrands’ vice president for Asian apparel operations.

And the average wage here is what?

JAVIER CHACON: The average, in general, in our location, the current annual — the current monthly take-home is about $80, but that’s — that’s the average. It might go higher, you know, depending on the productivity.

JEFFREY KAYE: The pay is $30 a month more than the country’s legal minimum. It’s a six-day, 48-hour workweek. Employees get free lunches, but cannot legally join a union that’s not approved by the Communist Party.

Since 1987, Vietnam has been shifting to a mixed-market system, undertaking what it calls “economic renovation.” It encourages private and foreign investment by offering low taxes and low wages.

Some 10,000 overseas businesses have pumped in about $40 billion worth of investments, mostly in manufacturing. At Vietnam’s foreign investment agency, official Boi Kuk Chung says the country is on track to become an industrial nation by the year 2020.

BOI KUK CHUNG: Vietnam, very attractive environment.

Factory boosts Wei's economy

JEFFREY KAYE: The investments are making a difference in people's lives. At Hanesbrands' factory in Wei, 50 percent of the workers previously worked on farms making subsistence wages.

Sewing operator Tran Timinan is 18 years old. Two years ago, her family sent her from their rural home just outside Wei to work as a seamstress in Ho Chi Minh City, once known as Saigon, in the south. She sent all the money she earned back home. She returned when Hanesbrands opened.

TRAN TIMINAN, Sewing Operator (through translator): It was difficult in the south working such long hours, from 6:00 or 7:00 in the morning until 6:00 or 8:00 at night. Now I feel more comfortable working only eight hours a day.

JEFFREY KAYE: Tran lives with her parents and her brother. They have running water for drinking and use well water for washing, primitive by American standards, but Tran's father, a 45-year-old construction worker, says the local economy is improving.

"It's clear," he says, "people have income and buy more things. More people have better things to sell."

Even with the global downturn, Vietnam's economic growth continues, although its pace has slowed. But there are questions about the long-term commitment to foreign investors and about how Vietnam is managing its industrial revolution.

Peasants from the countryside are flocking to the cities. In Hanoi, the capital, many live in dilapidated housing on the bank of the Red River. Air pollution is worsening. People are moving into once-quiet residential neighborhoods. Street vendors set up makeshift shops outside housing tenements. Water pressure is often insufficient.

And what does it cost to live around here?

Sociology Professor Dong Leegon from the Vietnam Academy of Social Sciences is tracking Vietnam's growth pangs.

DONG LEEGON, Sociology Professor: It's very quiet five years ago, and then for some reason it started, and people keep coming here to leave and stay for years in this area, to work for the factory nearby here. The housing, finally, I mean, it's very problematic because to get cheap rent you have to share the house with other workers, so maybe three, four person in one room and sharing the rent.

Pros, cons of foreign investment

JEFFREY KAYE: To supplement incomes, migrant factory workers peddle vegetables or newspapers. Others polish shoes. Hastily constructed apartment blocks have become casualties of neglect and disrepair.

Dong says investment in Vietnam is uneven. He wants the government to direct more foreign businesses to the countryside.

DONG LEEGON: They're always looking for the urban center to invest, so that the problem of the patterns of investment in Vietnam. But we encourage people to invest on agricultures, on farming, on livestock.

JEFFREY KAYE: There are other criticisms of foreign investors. While establishing its Asian factories, Hanesbrands closed 30 plants in the U.S., Latin America, and Canada, putting nearly 19,000 people out of work.

Outside a Hanesbrands plant in Eden, North Carolina, slated for closure, we talked to Scott Nova of the nonprofit Worker Rights Consortium which monitors working conditions in global apparel companies. Nova questioned how long foreign investors will remain in the places they move to.

SCOTT NOVA, Worker Rights Consortium: Corporations like Hanesbrands should make a long-term commitment to the communities in which they're operating wherever those communities are, whether it's Eden, North Carolina, or Hanoi, Vietnam. They should make a long-term commitment, and they should make a commitment to treat the workers they employ decently, pay a decent wage, respect the rights of workers.

JEFFREY KAYE: In Vietnam, Hanesbrands officials insist they're in the country for the long haul, but there is a caveat.

So at what point does Vietnam then become unaffordable for you?

JAVIER CHACON: So far, what we see is that we'll stay a very long time in the communities where we set operations.

JEFFREY KAYE: But at some point, might you be reassessing or moving on to another country where the labor costs are cheaper?

JAVIER CHACON: Twenty, thirty years from now, probably. You know, we cannot say never. But we usually stay for a relatively long time in the communities where we establish operations.

Reasons for Hanesbrands' move

JEFFREY KAYE: Indeed, Hanesbrands has stayed in some places for a long time. They were in North Carolina for 100 years before closing factories there.

Richard Noll, chief executive officer and board chairman of the Winston-Salem-based company, says Hanesbrands had to move.

RICHARD NOLL, CEO, Hanesbrands, Inc.: Our supply chain strategy has been consistent for many decades. It's to always operate in the lowest cost places that we can. That allows us to use that cost advantage to invest in our brand, invest in innovation, and keep prices low for our consumers.

SCOTT NOVA: Well, Hanesbrands' global strategy, unfortunately, is the same as the global strategy of virtually every major brand and retailer in the apparel business.

It's essentially it's a smash-and-grab. Go to a country, pay very low wages there for clothing for a short period of time, make some money, move on to the next cheaper country. I think we've certainly seen a race to the bottom.

JEFFREY KAYE: Is it a race to the bottom?

RICHARD NOLL: I don't think so. As you look at the places that we go and we operate, as industrialization is taking hold and we're able to bring jobs to those localities so that they can get their economic engines going, actually, I think on a worldwide basis, when you take a view across all boundaries, you're helping a lot of people rise their standard of living, which is good for all of us.

Effects of closings on communities

COUNSELOR: As far as jobs right now, we don't have any.

JEFFREY KAYE: But where does that leave those left behind? A Winston-Salem building once used by Hanesbrands is now a state unemployment office where former Hanesbrands workers come for counseling.

Well, they say this is the way the world is going, that they've got to be in China, they've got to be in Vietnam, that the labor is cheaper there.

BARBARA PLATER, Former Hanesbrands Worker: OK. Well, what about us here? We're not supposed to have a job?

WILLIE HILL, Former Hanesbrands Worker: The land of the free, milk and honey? Where's that? We have no milk and honey anymore. Everybody else got it. They took it from us.

JEFFREY KAYE: Barbara Plater and Willie Hill say they are boycotting Hanesbrands products, regardless of where they're made. Hanesbrands officials recently announced that, because of the weakened economy, sales are off and its American plant closures would have to be accelerated.