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["I promise, I will never die."] --retracted by Foxconn  (Source: Paramount Pictures)
Turns to employee relocation, pay raises after yet another death

Taiwan's Hon Hai Precision Industry's Chinese Foxconn unit has been having some problems at its Shenzhen plant lately.  A string of suicides has compelled Apple, Dell, and HP to launch a string into the supplier.  Foxconn previously responded by playing Buddhist music, offering employee counseling, and most requiring employees sign a letter promising not to kill themselves.

Apparently that's not working out so well.  On late Thursday, an employee slit his wrists, and according to the 
AFP has since become the eleventh to die this year.

After receiving news of the latest attempt Sony, Nintendo, and Nokia joined a pending probe into the company's business that currently included Apple, HP, and Dell.  In response to criticism about the letter, Foxconn CEO Terry Gou retracted it, saying it was inappropriate.

Guo is also trying yet another tactic in hopes of convincing its employees not to jump off high buildings -- giving them a pay raise.  Foxconn does give occasional raises, and claims that it has been planning to do so for some time, but never got around to it.  Currently entry level workers are paid 900 yuan (about $131.80) per month and also have the chance to earn overtime or bonuses.

According to Vincent Chen, an analyst at Yuanta Securities in Taipei, says that Foxconn typically bumps wages by 20 percent to meet holiday demand for consumer electronics.  However, he says that a pay raise of 50 percent is not outside the realm of possibility.

The pay raises will reportedly raise Hon Hai's operating costs by T$2.7B ($84M USD) and cut the company's profits by 10 to 12 percent, according to analysts at Citi.  Other analysts disagreed, though.  Chen comments, "I don't think this will impact Hon Hai's profitability...Hon Hai has raised salaries by up to 50 percent in the past, and it's still doing well."

It is believed that at least some of the suicides were financially motivated.  According to various employee accounts families of suicide victims with the company are typically paid between 8.5 and 10 years of pay.  Faced with scant salaries, some depressed employees reportedly think they are doing their families a favor by killing themselves.

Foxconn is also planning a mass relocation of about one fifth of its 400,000 employee Shenzhen workforce in Southern China to a plant in Western China.  Workers often migrate to get jobs at Foxconn's plants.  By moving the workers closer to home, Foxconn believes it can decrease their discontent.

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RE: Wait a minute...
By MrBlastman on 5/28/2010 10:07:59 AM , Rating: 2
To further elaborate on this as it bothers me so much...

Imagine Acme Inc., it produces won-tons and is quite profitable at it with a 10% profit margin.

It's simplified income statement reads as follows:

Revenues: 1,000,000
Costs of Goods Sold: 150,000.00
Gross Profit: 850,000.00

Operating Expenses/taxes/interest etc.,: 844,651.00

Net Profit: 5,349.00

Okay, so 0.5349% profit margin (this is Foxconn's REAL profit margin). Simple math follows:

2*(5,349.00*.12)=1283.76 (this is the total amount that accounts for employee pay)

1283.76/1,000,000 = .13% of the total revenues. That's right, salaries only account for .13%, and of the profits, 24%. It sounds to me like Foxconn could be paying them quite a bit more. The raise they are getting is only 641.88... they could double their pay and still be making a profit. Apparently, they are misappropriating money somewhere if the salaries of their staff accounts for such a small portion of their revenues considering how many people they employ.

If I dig further, that means that if they have 400,000 employees, 286.963 Billion in Revenue (real figure), they have 2.546 Billion in salary expenses. 72 Million/400,00 = 180.00. That's right, 180.00 USD. Something doesn't add up. So I dig further, Hon Hai (Foxconn), has 1.959 TRILLION dollars in Revenues (Yuan). That makes salaries account for 2.546 Billion. 2.546 Billion/486,000 equals 5,238.00/per employee (Yuan), converting this equates to about 766.40 US Dollars (Hmm). This is a paltry sum of money in the grand scheme of things, when you consider that the numbers don't add up.

Foxconn's Revenue to Employee dollars is 590,450.00
Walmart's Revenue to Employee dollars is 194,387.00

I can assure you Walmart doesn't pay that well, but, @ minimum wage even Walmart pays its employees @ 15,080.00/yr (assuming 40/hr workweek, 52 weeks a year pay). I think we can all agree here Walmart is one example bottom of the barrel in America when it comes to employment. Per Revenues, that equates to about 7.775% of Revenues in employee pay (@ minimum wage assuming 2.1 million employees w/408,214 Billion [actual] 2010 revenues). 7.775% Revenues versus 0.13% Revenues...

There is no way the Revenue-to-dollars add up correctly here.

Even using exchange rates, that is still only 5,238.00 Yuan purchasing power in China, so parity would mean they'd have to TRIPLE pay to get there (though, with their poverty line so low I'd garner goods do cost a fair bit less in China).

Foxconn needs to step up here. I could break this apart a million different ways but the numbers don't lie. They're inefficiencies here are _not_ in their employees, it is in OTHER areas of the company--that executives control. Areas that _they_ should be getting paid far less for seeing that their linemen are working so hard.

This stinks, Foxconn.

"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA

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