German-based footwear maker Adidas Group pledges to maintain communications with its Indonesian supplier, PT Prima Inreksa Industries, following its decision to terminate a contract with the company by the end of this year.
Adidas and Prima have announced that both parties have agreed to find the best solution to address the current situation and the job security of some 6,500 workers.
"We will continue to engage and support the factory during this difficult period," the Adidas Group head of footwear sourcing, Horst Stapf, said in a recent statement.
"We understand that factory management is focused on business continuity and on the job security of its employees," he said.
Adidas, which produces brands including Adidas and Reebok, has decided to terminate the contract after Prima failed to meet its orders from Adidas, reportedly due to financial difficulties.
Prima, as reported by several local media outlets, is unable to pay some US$37 million in debt to Bank Negara Indonesia, while its former owner left the company.
Prima, established in 1990, started to receive orders from Adidas in 1997. Before facing financial turmoil, Prima -- which is located in Banten, Tangerang -- produced up to 900,000 pairs of shoes annually for Adidas.
Prima spokesperson Paulus Harli said the company was working closely with Adidas to maintain constructive dialogue, keeping its employees updated on the management's progress.
"The factory is operating normally and our workers and our trade union have been informed of the six-month termination notice," Paulus said.
In spite of the break with Prima, Adidas pledges it is still committed to maintaining its business in Indonesia.
"Indonesia remains a key sourcing country for the Adidas Group," it said in the statement.
Adidas has been manufacturing athletic footwear in Indonesia for 20 years.
With 19 percent of the group's total volume of around 201 million pairs produced in Indonesia, "the Adidas Group still expects to double the size of its current business volume in Indonesia by 2012".
By that year, the group expects to order up to some 76 million pairs of shoes from local manufacturers.
According to the statement, currently there are more than 60 factories manufacturing footwear and apparel products for Adidas in Indonesia.
In 2006, Adidas ceased contracts with its suppliers PT Dong Joe Indonesia, PT Spotec and PT Tong Yang Indonesia, leaving some 18,000 people out of work. (dia)