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Foxconn stock falls as salary plan doubles

Hon Hai Group, also known as Foxconn, will boost monthly pay for most first-line workers, their line managers, and supervisors by 66 percent effective Oct. 1. Base salaries at Hon Hai’s Shenzhen factories will rise to $293 a month. Hon Hai Group, also known as Foxconn, will boost monthly pay for most first-line workers, their line managers, and supervisors by 66 percent effective Oct. 1. Base salaries at Hon Hai’s Shenzhen factories will rise to $293 a month. (AFP/ Getty Images)
By Tim Culpan
Bloomberg News / June 8, 2010

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TAIPEI — Hon Hai Precision Industry Co., the maker of iPhones, dropped the most in a year in Taipei trading yesterday after the company agreed to more than double wages at its Shenzhen factories following a spate of suicides.

The flagship of the Foxconn Technology Group, the world’s largest contract manufacturer of electronics, fell 5.6 percent, the biggest drop since May 12, 2009, while the benchmark Taiex index fell 2.5 percent. Foxconn International Holdings Ltd., a Hong Kong-listed affiliate, tumbled 5.5 percent before trading was halted. Hon Hai expects Foxconn shares to resume trading in Hong Kong today.

Base salaries at Hon Hai’s Shenzhen factories will rise to $293 a month in October, prompting Citigroup to cut its 2011 earnings-per-share estimate by 36 percent. At least 10 workers have killed themselves this year, prompting labor-rights groups to call the Taiwanese company a “sweatshop’’ that does not pay employees enough to avoid overtime.

Hon Hai chairman Terry Gou is scheduled to meet investors at the company’s annual shareholders’ meeting today.

Hon Hai Group, also known as Foxconn, will boost monthly pay for most first-line workers, their line managers, and supervisors by 66 percent effective Oct. 1, the company based in Taipei said in an e-mailed statement. Last Wednesday, the electronics maker raised base pay from $132.

“We’re very surprised by Mr. Gou’s decision,’’ said Jonathan Chang, deputy spokesman for the contract electronics manufacturer Pegatron Corp. of Taipei, which has about 60,000 workers in Shanghai and Suzhou and none in Shenzhen. The company has yet to decide if it will raise wages further, he said.

Hon Hai, which was criticized by labor groups for putting profit ahead of employee welfare, joins Honda in boosting wages in China. Steve Jobs, Apple chief executive, said last week the suicides were “very troubling’’ and that his company was “all over’’ Hon Hai to resolve the issue.

At least 10 workers have died from suicide, five during May, with three more attempts, according to Hon Hai. The deaths prompted Gou to open factories to the media and apologize.

Honda, Japan’s second-largest automaker, last week reached an agreement with most of the 1,900 employees at a Chinese parts factory to raise pay after workers walked out May 17.

More than 400,000 Foxconn workers will be affected by the pay raise with overtime hours likely to decline after the higher wages take effect.

Workers will receive the higher base wage after passing a three-month evaluation period.