Nike to cut jobs on growing labor costs in Asia

Nike is facing rising labor costs in its Asian factories which hurt companys profits. have raised to levels forcing company to take action. The multinational manufacturers are also battling a sustained rise in Chinese labor costs. The CFO of Nike Mr Don Blair said, cited by Financial Times: “I think the longer-term solution to addressing a lot of these labor costs has really been engineering the labor out of the product and that really is with technology and innovation.”

He supported its claim with examples of Nike’s Flyknit running shoe, whose upper part is a machine-knitted yarn. Nike is also using 3D printing technology to make prototype soles for professional athletes.

Net income in the quarter ended May 31 jumped 22%, Oregon-based Nike said yesterday in a statement. Excluding units sold, profit of 76 cents a share exceeded the 74-cent average projection compiled by Bloomberg.

Nike has been benefiting from increasing demand for running and basketball gear in North America as revenue in its largest market surged 12%. However, in China, consumers have forced Nike to use discounts. Still, worldwide sales gained 7.4% to $6.7 billion, topping estimates.

Still, comparing to the US manufacturing costs, Vietnam, China and Indonesia are labor heaven for the company as shoes and garment making in those countries represents firms 98-99% of production.

In China, the company is struggling to grow rapidly due to bad product choices and slowing economic growth. The Chinese department of the company explained it needed more time to fix its problems. Mark Parker, Nike chief executive, said to Financial Times: “The reset requires discipline and patience. The race in China is a marathon, not a sprint.”

Nike shares surged in after-market trading on its profit results, but then retreated 2.1% after company officials showed their discontent about the Chinese market.