Copyright 1997 The New York Times Company

New York Times, Front Page

November 8, 1997

By STEVEN GREENHOUSE

Undermining Nike's boast that it maintains model working

conditions at its factories throughout the world, a prominent

accounting firm has found many unsafe conditions at one of the

shoe manufacturer's plants in Vietnam.

In an inspection report that was prepared in January for the

company's internal use only, Ernst & Young wrote that workers

at the factory near Ho Chi Minh City were exposed to

carcinogens that exceeded local legal standards by 177 times in

parts of the plant and that 77 percent of the employees suffered

from respiratory problems. The report also said that employees at

the site, which is owned and operated by a Korean

subcontractor, were forced to work 65 hours a week, far more

than Vietnamese law allows, for $10 a week.

The inspection report offers an unusually detailed look into

conditions at one of Nike's plants at a time when the world's

largest athletic shoe company is facing criticism from human rights

and labor groups that it treats workers poorly even as it lavishes

millions of dollars on star athletes to endorse its products.

Though other American manufacturers also have problems in

overseas plants, Nike has become a lightning rod in the debate

because it is seen as able to do more since it earned about $800

million last year on sales of $9.2billion.

Critics of Nike's working conditions, who had been given a copy

of the internal report by a disgruntled employee, made it available

to The New York Times and several other reporters, prompting

the company to call a news conference Friday to address the

allegations.

"We believe that we look after the interests of our workers," said

Vada Manager, a Nike spokesman. "There's a growing body of

documentation that indicates that Nike workers earn superior

wages and manufacture product under superior conditions."

He and other Nike officials said the company had carried out "an

action plan" to improve working conditions since the report was

issued last January, 17 months after the factory opened. The

company said it had slashed overtime, improved safety and

ventilation and reduced the use of toxic chemicals.

The company also asserted that the report showed that its internal

monitoring system had performed exactly as it should have.

"This shows our system of monitoring works," Manager said.

"We have uncovered these issues clearly before anyone else, and

we have moved fairly expeditiously to correct them."

While Nike has often been attacked over low pay and long hours,

the Ernst & Young report pushed hard on a relatively new front

for Nike's critics: air quality in its factories. Ernst & Young found

that toluene, a carcinogen, was in the air at different sites in the

factory studied, six to 177 times the amount allowed by

Vietnamese regulations, which itself is about four times as strict as

American toluene standards. Extended exposure to the

carcinogen toluene is known to cause damage to the liver,

kidneys and central nervous system.

The fact that such conditions existed in one of Nike's newer

plants and were given a withering assessment by Nike's own

consultants made for yet another embarrassing episode in a

continuing saga.

Only five months ago, the company had taken out full page

newspaper ads excerpting Andrew Young, the civil rights

advocate and former United Nations representative, who had

inspected 15 Nike factories last spring at Nike's behest. After

completing his two-week tour covering three countries, he

informed Nike it was doing a "good job" in treating its workers,

though he allowed it "should do better." Young was widely

criticized by human rights groups and labor groups for not taking

his own translators and for doing slipshod inspections, an

assertion he repeatedly denied.

Like many American apparel makers, Nike uses many

subcontractors in Asia, with some 150 factories employing more

than 450,000 workers. And like many, that tricky relationship is

often offered as a reason why it is hard to impose American-style

business practices on factories in that part of the world.

The Tae Kwang Vina factory, which was inspected by Ernst &

Young, is one of Nike's larger plants. It has 9,200 workers and

makes 400,000 pairs of athletic shoes each month at Bien Hoa

City, some 25 miles northeast of Ho

Chi Minh City, formerly Saigon. The Ernst & Young report

painted a dismal picture of thousands of young women, most

under age 25, laboring 10 1/2 hours a day, six days a week, in

excessive heat and noise and in foul air, for slightly more than $10

a week. The report also found that workers with skin or breathing

problems had not been transferred to departments free of

chemicals and that more than half the workers who dealt with

dangerous chemicals did not wear protective masks or gloves.

In plain, unemotional language, the report detailed problem after

problem. "Dust in mixing room exceeded the standard 11 times,"

the report said. And, it added, "There's a high rate of labor

accidents caused by carelessness of employees." Later, the report

pointed to two other problems: "workers' inadequate

understanding of the harmful effect of chemicals" and "increasing

number of employees" with health problems continue to work

with chemicals.

The report also stated that "more than half of employees" in

several departments who use chemicals "do not wear protective

equipment (mask and gloves) -- even in highly hazardous places

where the concentration of chemical dust, fumes exceeded the

standard frequently."

The Transnational Resource and Action Center, a nonprofit group

based in San Francisco that often criticizes conditions at

American factories overseas, made the report available. The

center obtained the report from Dara O'Rourke, an environmental

consultant for the United Nations Industrial Development

Organization whose job involves inspecting factories in Vietnam

and who was given a copy of the report by a disgruntled Nike

employee.

O'Rourke, who is also a research associate at the Transnational

Center, said he was making the report public because he wanted

to pressure Nike to treat its workers better and because he was

convinced that Ernst & Young's inspection report let Nike off

easy. O'Rourke said wages at the plant were the lowest of any of

the 50 factories he visited in Vietnam, and that working conditions

were well below average.

Tien Nguyen, Nike's labor practices manager in Vietnam, said at

a news conference Friday that as soon as Ernst & Young made

its confidential report 10 months ago, the company took

numerous steps to improve working conditions.

Nguyen said the number of hours worked a week had been

reduced to 45, from 65. He said that many more fans had been

installed, but he acknowledged that the company had done no

measurements to determine whether chemical levels were now

low enough to meet legal standards.

With the improvements, "it's markedly better than shoe factories

in the United States," said Dusty Kidd, Nike's director of labor

relations. "The shoe factories in Vietnam are among the most

modern in the world. The factories there are excellent factories,

but there are a lot of things they could get better."

But O'Rourke, who has visited the Nike factory three times as

part of his United Nations duties, said that when he visited

Vietnam last month, several workers said the plant was hardly

better than in January. He said many workers still failed to wear

protective equipment, that pay remained low and that m anagers

still yelled at or otherwise harassed workers.

Young, who made his visits in June, did not inspect this particular

plant. And his report, which pronounced the plants to be "clean,

organized, adequately ventilated and well lit" had few findings in

common with the Ernst & Young report.

Was he aware of the Ernst & Young study prior to the trip? Doug

Gatlin, who toured the Nike factories with Young, said they were.

"We didn't see or read all of the reports they did prior to our

going," said Gatlin, who nonetheless defended the job they did.

"Nike always said they were asking for the facts," said Gatlin,

who was working for Young's consulting firm, Goodworks

International.

Young could not be reached for comment because he was

traveling.

As far as the Ernst & Young report went in shedding light on

Nike's practices, some found fault with it, too. Rourke, for

instance, criticized its conclusion that most employees were happy

with the wages and working conditions. O'Rourke said the

workers whom Ernst & Young interviewed were scared to speak

candidly. O'Rourke said his interviews found much discontent.

O'Rourke said the Ernst & Young report had so many

inadequacies that it showed the benefits of using noncommercial

monitors, like human rights groups, to inspect factories.

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