Pacific Brands Job Slash

Originally posted on Political Duo.

Pacific Brands chief executive Sue Morphet has announced that the company will slash more than 1,850 jobs as well as closing seven factories. Well-known for its ‘made in Australia’ labels such as Bonds, Morphet has said that it was a tough decision which has to be made because it was no longer ‘competitive’ for the company to do so on the long term.

The disgust cannot be any stronger on how Pacific Brands went about this whole affair:

1. Workers are warned that if they walked out of their job prior to being given company notice of their retrenchment, they would lose their redundancy pay. Textile Clothing and Footwear Union NSW Assistant Secretary said ‘workers should not be penalised for leaving early if they found another job’. Why should workers who knew that they would be retrenched be forced to work for a company that has little regard for their interests?

2. According to Textile, Clothing and Footwear Union national secretary Michele O’Neil, it does not make sense to ‘close those parts of the business that are profitable’. If O’Neil is right, then, presumably, certain operations, including those that have been scheduled for closure must be commercially viable. This makes the claim that the company’s net loss of $149.956 million a rather weak argument. Perhaps the major factor driving this decision has been lost amongst the reporting and debate. Let us reiterate: It is based on ‘cost-cutting strategy to save the company $150 million a year’.

3. It has also received governmental assistance of up to ‘$17million’ over the past two years. This offshore move to other countries, despite plea from the government, means the company is happy to receive taxpayers money when it benefits them. For a company that calls itself proudly made in Australia, 75% of its manufacturing were already done in South-East Asian countries including China prior to this announcement. By moving more operations offshore, it has shown itself as a corporation that has scant regard for its community – whether to the workers or the suppliers who would be heavily affected by the decision.

4. While Pacific Brands claims that moving their manufacturing operations to other South- East Asian countries including China was motivated by lower cost of operations, the decision to do so is more than just that. It knows that it can relocate its manufacturing bases to these countries because of their less rigorous pro-labour governmental regulations, non-existing or weak trade unions and a distinct lack of respect for worker rights in comparison to domestic Australian labour laws.

As the debate on the global financial crisis rages on, many multi-national corporations will follow the footsteps of Pacific Brands and come up with feeble excuses to slash local jobs or relocate to jurisdictions with weak labour laws. The workers will be at the suffering end, whether the ones who are retrenched or those in developing countries, forced to work for a pittance. Meanwhile, MNCs will continue to pile the blame on other parties or insist on factors outside their control, except themselves, for the ‘difficult’ decisions they have to make.

Ultimately, the global financial crisis will act as a convenient cover for many unethical MNCs to continue its misbehaviour: be it laying off workers at their home country, or moving their plants to countries that continue to exploit workers in the South.

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55 Responses

  1. Leaving aside the process of how Pacific Brands announced the decision, one could look at the bigger picture and consider what is the future of labour-intensive, low skill jobs in Australia.

    If you look at the history of Pacific Brands share price one can see that the Board had to do something.

    http://www.asx.com.au/asx/research/CompanyInfoSearchResults.jsp?searchBy=asxCode&allinfo=on&asxCode=PBG

  2. Presumably, the writer of this post has never bought or worn an item of clothing, or pair of shoes, made in any “South- East Asian countries including China” for fear of adding to the obvious exploitation of the workers “in developing countries, forced to work for a pittance”.

    The same writer no doubt also ensures all of their apparel is exclusively Australian-made, thus supporting only those textile, clothing and footwear workers who, by some freakish stroke of luck, have avoided the mass-exodus from Australia of greedy multi-national corporations, and still have jobs.

    Because that’s what you would have to do, to be critical of companies wanting to manufacture and sell products at prices competetive with those already imported from South-East Asia. Otherwise, you could hardly blame them, could you?

  3. “what is the future of labour-intensive, low skill jobs in Australia.”N5

    Hard to escape the fact that they are rooted.

    So many teeming more, understandably, willing to do so much more for so much less just to get a toehold on “teh dream”. None of them live here & the corporatocracy will milk cheap labour for all it’s worth wherever it may be exploited. This is why flags mean nothing now.

  4. Tony

    The writer of the post is actually from South East Asia.

  5. touche turtle…

  6. Joni, there was no author’s name, and it didn’t sound like your prose. Does this person reside in Australia?

  7. Tony, on February 26th, 2009 at 9:46 pm Said:

    “Does this person reside in Australia?”

    Perhaps we should stick to the ISSUE? Lol.

  8. What is the relevance of that? And yes they do.

    One of the writers main points is that the SE Asian countries have “less rigorous pro-labour governmental regulations, non-existing or weak trade unions and a distinct lack of respect for worker rights”.

    But I still fail to see your point.

  9. “Perhaps we should stick to the ISSUE? Lol.~N5”

    OK, the issue – or the part of the post I take issue with – is the notion that companies somehow should be expected to retain all of their Australian based-manufacturing facilities, in the face of ever-decreasing tarriffs on imports.

  10. Toiletboss, on February 26th, 2009 at 9:40 pm Said:

    “Hard to escape the fact that they are rooted.”

    Well they are if we focus on that end of the market. Take the shoe companies like ADIDAS and NIKE for example, they gave up making shoes years ago. Now they realise their strengths are in Marketing and Design and therefore they leave the ‘making’ to low labour cost countries.

    It’s why we need to exploit our comparative advantage which can only come from a ‘superior’ education system.

  11. Interesting to look at the link N5 – not simply the collapse in the price, but the increasing volume being traded during a further price decline. This, I’d imagine, gets a fair bit of attention from boards. There is no doubt that Pacific Brands had to restructure.

    Boards are required by law to act in the interests of the shareholders, this means that were it makes commercial sense to send manufacturing operations offshore they should.

    It is not up to boards to support local industry; it is up to the people that decide to purchase the products, or not.

  12. Joni,

    Is the writers position that it’s a good or bad thing that those workers in the SE Asian TCF industries have jobs, albeit much lower paid than the equivalent Australian workers.

    Does the writer think the products the SE Asians make should be allowed to be sold on the Australian market, under lower and lower tarrif barriers, until there are no tarrif barriers at all. Surely this would benefit those SE Asian workers.

    Does the writer think the Australian companies who cannot compete with these imports any more, because of our relatively high labour costs among other things, should nevertheless persevere at all costs despite multi-million dollar losses?

    Or should they also go to SE Asia to make their products so they can then compete on level playing foeld?

  13. Tom of Melbourne, on February 26th, 2009 at 9:59 pm Said

    “the increasing volume being traded during a further price decline”

    Yes, it’s pretty dramatic.

    “Boards are required by law to act in the interests of the shareholders”

    Indeed they are! And in some circles it would be argued that they were far too slow in acting.

    “It is not up to boards to support local industry; it is up to the people that decide to purchase the products, or not”

    Also true! Yet they have now lost what should have been a powerful marketing tool, the “MADE IN AUSTRALIA’ brand.

    The issue, as always, has a number of dimensions which will unfold as the debate develops. Or maybe not? Lol.

  14. Nature5

    “The issue, as always, has a number of dimensions which will unfold as the debate develops. Or maybe not? Lol.”

    You’re becoming a master Nature5 (or perhaps you already are -wink). So many things about the future are just unknown and so unpredictable that all we have to go off are the facts we have now and assumptions based on those facts about the future. But then,… as usual, the facts change thereby changing the story. I like Keynes’ comeback every time he changed his position ‘When the facts change, my mind changes, what do you do sir?

    Excellent observations by the way.

  15. Also true! Yet they have now lost what should have been a powerful marketing tool, the “MADE IN AUSTRALIA’ brand.

    Meh, ‘made in Oz’ carries weight in a nation of 21 million consumers, but ‘made in China’ is both the de facto global standard and carries practical weight in a nation of a billion consumers whose economy is still growing at *gasp* 6-8%. Arguably, it’s not just cheaper to produce there and export to here; it will become increasingly lucrative to produce there and to sell there, and not to not export from here.

  16. John McPhilbin, on February 26th, 2009 at 10:23 pm Said

    “When the facts change, my mind changes, what do you do sir?”

    John, what comes first, the ‘fact’ or the ‘mindset’?

    Does one need a particular mindset to identify a ‘fact’? For example, can you count accurately the number of “squidgets” in your room and report back? Are there 2 or ten or maybe thousands? Count carefully now!

  17. Legion, on February 26th, 2009 at 10:27 pm Said:

    “it will become increasingly lucrative to produce there and to sell there, and not to not export from here”

    Indeed! But the current problem is that the Chinese are into saving not spending, while in the West they are into spending not saving. That’s the core of the present economic ‘problem’.

  18. N5, is that a fact, or a squiget? Arguably the West is turning its attention more to saving, and more and more chinese are coming out of poverty and becoming consumers.

    Facts please!

  19. The price of labour is only a minor component in many manufacturing companies. In heavy manufacturing (as distinct from TCF), it is often only 10% of the cost of production.

    Availability of capital & market, cost of energy & materials, reliability of production are often more critical factors.

    Labour predictability is a significant factor in reliability of production, and from time to time our labour market has a (perhaps unwarranted) reputation for unpredictability. This has had an effect on investment decisions over many years.

    The types of decisions we see here are probably, in part, a consequence.

  20. Legion

    “Arguably, it’s not just cheaper to produce there and export to here; it will become increasingly lucrative to produce there and to sell there, and not to not export from here.”

    Valid point! However, China are in real trouble at the moment and there ability and/or commitment to keep producing goods at similar volumes and at the dirt cheap cost levels of the past are likely to be tested. Not only that, given their economy has tanked so badly of late, there’s the risk of political unrest that could do significant damage internally.

    Also, It’s acknowledged that China’s rapid ascent as a global exporter of manufactured goods has helped keep inflation at low levels over the last decade. The question now if whether they will have the ability to continue expanding at the record rates they have been in recent years as well as produce and export goods at similar historical levels. There’s a view, and I tend to agree, is that China’s future export will become increasingly inflationary.

    That present some real problems, because what country would be able to imitate China’s ability to produce on such a massive scale.

  21. Tom, surely the unions bear the lion’s share of the blame here? 😉

  22. Why then are we taking in people if our jobs are heading overseas? We had a poster in here the other day saying that immigration creates jobs. It looks like those jobs will be confined to assisting the unemployed fill out an application for the dole.

  23. Nature5

    Can you hear the sound of my one hand clapping?

    Let me see? John, what comes first, the ‘fact’ or the ‘mindset’? Well one would have to have some type of hypothesis to hang their facts on. And we both know that all human constructs are flawed.

  24. Stephan

    It seems the the government are sensibly cutting our immigration intake due to deteriorating circumstances.

  25. John,

    If a treee falls in the forest and nobody is there, does it make a sound?

  26. Yes Tony, that goes without saying. But best I not get started on the subject.

  27. John, immigration should be reduced to zero.

  28. John McPhilbin, on February 26th, 2009 at 10:47 pm Said:

    “Well one would have to have some type of hypothesis to hang their facts on”

    John you miss the point. Please report on your count of the number of “squidgets” within your ken. And if you can’t, can you perhaps speculate on why you can’t?

    As for Tony, on February 26th, 2009 at 10:40 pm who Said:

    “Facts please!”

    Talk about missing the point. Lol,

  29. Tony, on February 26th, 2009 at 10:50 pm Said:

    John,

    If a tree falls in the forest and nobody is there, does it make a sound?

    If one is deaf could that conundrum really apply? (wink). Ah! Does a bear shit in the woods? Is the Pope really a Catholic? (lol). These are all important questions Grasshopper!

  30. N5,

    =;^)

  31. Nature5

    “John you miss the point. Please report on your count of the number of “squidgets” within your ken. And if you can’t, can you perhaps speculate on why you can’t?”

    Note how I tried to skillfully redirect attention as I tried to work out exactly what squidgets are? My answer? There’s no such thing as squidgets so how can I count them! Its taken my this long to find my damn dictionary (lol)

  32. “Stephan, on February 26th, 2009 at 10:55 pm Said:

    John, immigration should be reduced to zero.”

    You’re quite the fisherman Stephan Lol Wait patiently and you may get a bite.

  33. John

    Don’t you know that you should always brang your dictionary to the blogocrats table, otherwise the word-police will have a go at you (continually).

  34. “It seems the the government are sensibly cutting our immigration intake due to deteriorating circumstances.”~John

    And exporting the TCF jobs they would have had, just so they don’t miss out on the work. You can’t say they’re not fair.

    / half-joking

  35. Joni

    Ah, so Nature5 is that undercover word-cop we’ve been warned about. Perhaps I should keep my thesaurus handy as well.

  36. “John, immigration should be reduced to zero.” (Stephanovich)

    I hope that’s not retrospective. My grandfather was an illegal immigrant into Oz, coming in on a fake Greek passport. He wasn’t Greek, but Greeks were allowed into the country.

    Do you want me to pack?

  37. No – it is Lord Reb who keep me on the straight (?) and narrow.

  38. John McPhilbin, on February 26th, 2009 at 11:01 pm Said:

    John you mean you had to first have the ‘idea’, ‘theory’, ‘concept’, ‘hypothesis’, ‘mental construct’ or whatever before you could identify the ‘fact’?

    You acknowledge that the concept of ‘ squidgets’ had to be understood before you could count same?

    As for:

    “There’s no such thing as squidgets so how can I count them! ”

    You mean John, that you want me to tell you what they are before you come up with the ‘facts’? Surely not. Facts such as ‘squidgets’ that can be counted devoid of theory?

  39. Tony, on February 26th, 2009 at 11:06 pm Said:

    “It seems the the government are sensibly cutting our immigration intake due to deteriorating circumstances.”~John

    And exporting the TCF jobs they would have had, just so they don’t miss out on the work. You can’t say they’re not fair.

    / half-joking

    And they have the gumption to call themselves ‘socially responsible citizens’. It’s all fluff

    http://www.pacificbrands.com.au/About-Us/Our-Values.asp
    Our values are at the core of everything we do; they underpin our business strategy, are measured in our performance management system and guide our daily thoughts, actions and decisions. We all aspire to model these behaviours everyday.

    Unity – work as one winning team, collaborate

    Commitment – do it wholeheartedly or not at all

    Innovation – to lead the way, explore, dare to try

    Speed – be there first, do it, don’t wait

    Accountability – do what you say, take responsibility

    Pacific Brands Limited
    http://www.pacificbrands.com.au/Files/Corp-Gov—Code-of-Conduct-08.pdf
    Code of Conduct
    1. Purpose
    The Company is committed to the highest level of integrity and ethical standards in all business practices. Employees must conduct themselves in a manner consistent with current community and Company standards and in compliance with all legislation.
    This Code of Conduct outlines how the Company expects directors and employees to behave and conduct business in the workplace on a range of issues. It includes legal compliance and guidelines on appropriate ethical standards. The Code of Conduct does not include:
    • Every ethical issue that an employee might face; nor
    • Every law and policy that applies to the Company.
    The objective of the Code of Conduct is to:
    • Provide a benchmark for professional behaviour throughout the Company;
    • Support the Company’s business reputation and corporate image within the community; and
    • Make directors and employees aware of the consequences if they breach the policy.

  40. Joni, is that Lord Reb or Lewd Reb?

  41. Nature5

    Yes, to all of the above

  42. In my neck-of-the-woods, there are such things as squidgets, and they can be counted.

    For anyone else to agree on how many squidgets there are, they must first agree on the meaning of the word squidget.

  43. “Ah, so Nature5 is that undercover word-cop we’ve been warned about.”

    Warned about! And I thought that this was a censorship free site. Lol.

    Wheels within wheels. Lol.

    Pathetic!

  44. Miglo, before you go don’t forget to give us a lecture about our history and treatment of Aboriginals while at the same time lessening or ignoring the rich history of slicing and dicing and invading by your mother country (let’s assume it was Greece) or are we only allowed to go back as far as 1788? 

    It might be a struggle for the next 10 years as we wander aimlessly in this dystopia without you but we might just make it.

  45. John McPhilbin, on February 26th, 2009 at 10:41

    You worry too much, John. China can just give the Yanks what they keep demanding…a little creative re-pegging downwards of the Yuan when it suits, and those Western consumers can keep the inflation genie at bay while continuing to export their jobs and their productive capacity to China and watching their secondary and tertiary industries leach away…it’s all a balancing act. 😉

  46. Stephan, I’m not Greek.

    I’m hoping, that without me, you’ll take the initiative to learn of the richness of Indigenous culture, as well as the many wonderful Indigenous Australians that have added colour to our lives.

    May I suggest that a good starting point would be Gavin Wanganeen.

  47. I blame John Button for the Pac Brands predicament:

    “In 1983 when Hawke became Prime Minister, Button became Minister for Industry and Commerce, a post he held until 1993. During this period Button carried through major changes in industry policy, lowering tariffs and reducing other forms of protectionism. This caused large job losses in manufacturing industry and provoked bitter opposition among Labor’s trade union base.”

    http://en.wikipedia.org/wiki/John_Button

  48. That present some real problems, because what country would be able to imitate China’s ability to produce on such a massive scale.

    None?? And here’s a little narrative I produced earlier, but didn’t log, for the ‘horrors’ of the digital marketplace thread…

    Another simplified prediction of a possible up-when transitional development, which I’ll dub the ‘ad hoc population-base theory of future global wealth creation and accumulation’; it’s kind of an antithesis of the military empire or currency empire or re-distributive, value-adding and rent-seeking industrial empire scenarios which formerly sustained the West’s privileged position and gave it its de facto extended population-base.

    Idea-construct: In advanced technical and knowledge economies, weight of numbers engaged in technical activity tends to produce economies of scale and more techné and knowledge.

    Contention: Purely territorial economies (envisaged historically as nation-states) with higher numbers of producer-consumers, especially those which adapt to produce technical and knowledge products and do so relatively more cheaply (even if their only apparent advantages are lower labour costs which foster increased direct participation in production and indirect capacity-building through today’s foreign and tomorrow’s domestic investments, acquired experiences and competitive innovations to seize yield from the fields of relative disparities in the short-term and absolute market-share of existing and future made-markets in the longer-term) will produce more saleable technology, knowledge, and products across a wider breadth of marketised activity in the long-run than purely territorial economies with lower population bases.

    Tentative applied conclusion: That isn’t the ‘expensive’ and ‘ageing’ nation-states of the West, either domestically or globally, again, as more populous economies come online and ‘develop’ their ways broadly into all extant economic domains and also eke out yet more specialist niches, through complexification of divisions of labour possible within economies of scale and through sheer scale, in the domestic and global economies.

    Further tentative conclusions: Digital bazaars illustrate that the developed economies of the West will be sweating more than they would like in the (ICT) techno-utopia staked out as being central to their futures. The same can be said for most areas of technical skill, where the West is happily importing people it considers useful today, in large measure due to ‘developing’ nations already producing competent technicians in larger batches and more cheaply than the West can (which also is prompting the gamut of technical ‘tourisms’ to those places), when those developing economies reach sufficient complexity in their internal developments and consumption patterns tomorrow or the day after to simply invert the economic paradigm.

    Implication: Retaining territorial conceptions of economies is probably not a good long-term strategy, and promoting a conception of a global economy probably is a good strategy. That is to say, it’s a good strategy because it’s a necessary strategy: ‘sharing’ the global producer-consumer population-base now that ‘conquering’ a population-base isn’t possible, and hoping to use existing technological leads and wealth-for-investment disparities to ‘purchase’ or ‘license’ a stake in the activities of that enlarged population-base, if not outright effective ‘control’, to enmesh those economies so that the presently advantaged, but territorially long-term disadvantaged, aren’t absolutely left behind in the race to developmental parity and beyond to a potential, up-when disparity.

  49. Tony, on February 26th, 2009 at 11:25 pm Said:

    “For anyone else to agree on how many squidgets there are, they must first agree on the meaning of the word squidget.”

    Agree! The ‘facts’ can only be identified if one has the ‘theory’ in the first place. One can’t count ‘red’ objects unless one has an understanding of what constitutes ‘red’ in the first place.

    The notion that ‘facts’ come before mental constructs are a non-sense. When Keynes said:

    “When the facts change, my mind changes, what do you do sir?”

    He didn’t understand how knowledge develops,

  50. N5

    I determine nothing.

  51. Nature 5, on February 26th, 2009 at 11:40 pm

    How do you know all of this without having a mental construct for the function of epistemology itself? Since when has an (inter-)subjective, internal version of agreed knowing been the factual standard for either the epistemological knowing of things, or evaluation of their ontological (non-)existences?

  52. joni, going by the insightful info the writer has provided so succintly in their post…and that provided by an audience member on Q&A (more balanced & rivetting discussions tonight)…I’m beginning to think that the Opposition’s claims of Federal government mismanagement in regard to this issue…and simultaneous accusations that the Pacific Brand layoffs are proof certain of an ineffective Xmas stimulus package, are merely hyperbole & general baloney.

    It seems Pacific Brand’s executives have some real core ethics searching to do. They’ve basically left it to the government(s), unions & families & friends of WORKERS to pick up the pieces.

    So much corporate welfare, so little corporate compassion.

    Time & time again.

    Hopefully change IS coming:

    http://www.nytimes.com/2009/02/26/us/politics/26budget.html?_r=1&th&emc=th

    We’ll see.

    It’s good to see Rudd promoting positive economic news & figures. Helping to restore confidence.

    I’m hoping that some of our more dire predictions do not eventuate John et al.
    N’

  53. So is the take of the majority here that a firm has no right to make strategic decisions to restructure their business so as to reduce the costs of their products (and thus keep financiers and shareholders happy)?

    As I see it, the firm has done the following:
    – lobbied hard over the years for tariffs NOT to be reduced on Australian-made TCF (but also sensibly took the compensatory payments from government when tariffs were cut)
    – when their lobbying was not achieved, very sensibly explored avenues to ensure their products remained competitive against imported goods (1. by increasing the efficiency of their local plants and 2. investing in facilities in the cheaper locations that also have the requisite manufacturing capabilities – NOTE: they went to SE Asia and China, not Africa)
    – subsequently shifted to completely foreign production when the price environment made that more justifiable (presumably the cost savings > 5% tariff imposition)
    – conscious (in hindsight) of over-investment in multiple brands, chosen to rationalise them (the big bit of their announcement that has been underexamined vs the furore over jobs)

    Getting back to original question (right to reduce costs), the market will speak its mind on this. If consumers don’t see lower t-shirt prices or have a genuine willingness to pay a premium for Aussie-made goods then Pacific Brands will be punished.

    I don’t see that the government has much say in all this. They chose to reduce tariffs (in line with mainstream economic rhetoric about allowed comparative advantage to play out unhindered). To turn around and say “but you can’t leave” is completely incompatible (even if that’s what they are doing in the auto industry).

    See more on this at my blog: http://internationalbs.wordpress.com/2009/02/26/pacific-gets-pretty-specific/

  54. Andre – welcome to the blog. Very good points.

  55. Miglo, Go The Mighty Power and that champion, Wangas!

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