Strike Trips Up Largest Sport Shoe Factory

A strike at the world's largest sports shoe manufacturer has entered its second week, hampering production for global brands such as Nike (NYSE: NKE - news) and Adidas (Other OTC: ADDDF - news) .

Employees at Yue Yuen Industrial (Frankfurt: YUE1.F - news) (Holdings) Ltd's massive factory in southern China have failed to reach a deal over labour terms with the company.

The complex employs more than 40,000 people and has been hit by stop-start strikes.

The dispute stems from underpayments for social security and housing fund payments, which are required by local law.

The dispute has now become one of the largest strikes in China's huge private sector.

Low-cost manufacturers face rising labour activism as a shortage of migrant workers, who remain legally domiciled in their home districts, putting upward pressure on costs.

Tens of thousands of workers remained on strike on Tuesday, according to labour groups, after rejecting the company's latest offer.

The offer included making up back payments for social security and housing, full contributions for those benefits starting May 1 and a £22 monthly allowance.

"We'll pay what is in the regulations, there should not be any concern on that," said Yue Yuen spokesman George Liu.

Meanwhile, the workers at the Dongguan plant have demanded a 30% pay raise and a new commitment to future contributions.

They also say it is unfair that workers would be required to make up their share of missed contributions from the past. And they want their own representatives to negotiate with management.

Another, smaller Yue Yuen plant in Jiangxi province was hit by a brief strike on Monday that also centred on social security payments - but for the opposite reason.

Mr Liu said workers slowed production because they did not want to make full payments, which would leave them with less take-home pay.

The strikes come as an executive for global shoe brand Nike admitted the huge pressure on increasing margins led the company into Bangladesh for clothing, ahead of a factory collapse last April in Dhaka that claimed more than 1,100 lives.

Nike chief operating officer Eric Sprunk said: "Our competitors were moving fast into Bangladesh and the pressure was getting bigger and bigger.

"We needed a strong point of view to say 'are we going to increase our source base there or not?'."