Know what’s expensive? Improving the working conditions of weary Chinese factory employees.
The prominent electronics manufacturer Foxconn learned that the hard way when its efforts to improve working conditions and wages cut into its profits. Fortunately for Foxconn shareholders, Apple and Foxconn have a solution: split the costs. The two companies plan to share the initial costs of improving the conditions of Foxconn’s factories, Reuters reports.
Foxconn CEO Terry Gou made the announcement on Thursday. However, he did not reveal the total costs of the efforts or whether Apple and Foxconn would be splitting the costs equally.
Gou called the effort “a competitive strength,” though it’s likely that that strength will be mostly an improvement to the public images of both Apple and Foxconn. (The remarks were made during the opening of a new headquarters in Shanghai, after all.)
That Foxconn would enter into such an agreement with Apple isn’t the biggest surprise.
Foxconn announced in February that it planed to raise the pay of its workers, many of whom were working over 60 hours per week and still unable to meet their living costs. In connection with the raises, Foxconn also worked with Apple to hire new workers to handle the significant demands of creating Apple’s products.
This, predictably, led to Foxconn’s profit margins sliding to 4 percent in the first quarter of this year from 7.25 percent during the same period in 2011. Foxconn couldn’t have been happy with that, and it’s why sharing costs with the cash-flush Apple seems like such an ideal (and expected) outcome.