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Nike Reaches Deal With Indonesian Contractor

After receiving assurances about quality and future severance deals, Nike agrees to extend shoe production at two factories employing 14,000 workers.

JAKARTA, Indonesia (AP) - Nike Inc. agreed Tuesday to extend shoe production at two Indonesian factories that employ 14,000 workers for up to 18 months, after receiving assurances from the local supplier about quality and future severance deals.
 
Nike previously said it would stop working with PT Hardaya Aneka Shoes Industry and Nagasakti Paramashoes Industry by the end of the year, triggering protests by workers and demands from lawmakers that the government intervenes in the dispute.
 
Siti Hartati Murdaya, owner of both factories, had been demanding Nike offer the workers jobs with its other contractors in Indonesia or give her more time to pay the workers' severance packages.
 
Under the deal reached Tuesday, one of the factories will continue supplying Nike until July 2008 and the other until July 2009, the company said in a statement.
 
Nike agreed to make ''an exception'' to its standard agreement so the factory owner could develop a business plan ''that takes into consideration the well-being of (her) workers,'' said Eric Sprunk, the company's vice president of global footwear.
 
Murdaya, whose factories have been supplying Nike for 18 years, acknowledged she would be responsible for any future severance deals and agreed to meet minimum Nike standards for product delivery, quality and compliance.
 
''The agreement with Nike has been signed; I was represented by my son,'' Siti told reporters. ''We are happy that Nike is cooperating with us so that it is not necessary for a mass termination of workers.''
 
Nike, based in Beaverton, Oregon, manufactured a fifth of its shoes in Indonesia in 2006 and has repeatedly said it hoped to boost that figure over the coming years. It subcontracts work to dozens of factories nationwide.
 
The company came under fire after it announced last month plans to end its contracts with PT Hardaya Aneka Shoes and Nagasakti Paramashoes. Factory workers twice demonstrated outside the company's Indonesian headquarters holding banners accusing the company of lying.
 
Nationalist legislators and commentators in the media also criticized the move.
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