Date of publication: March 14, 2006
Source: South China Morning Post
By Toh Han Shih
Thousands of jobs in the shoe industry in China and Vietnam are being axed as European Union anti-dumping measures expected this month begin to bite.
Kingmaker Footwear Holdings would slash its workforce in China and Vietnam to about 12,000 this year from a peak of 20,000 last year, executive director Daniel Chan Ho-man said yesterday.
Most of the job cuts would be in China, where Kingmaker would close two factories, Mr Chan said.
Kingmaker's share price fell 9.91 per cent to $1.09 yesterday after the company announced it had lost its biggest customer, Timberland.
Kingmaker refused to share the EU anti-dumping duties - imposed on shoes with leather uppers - with the US shoe brand, Mr Chan said.
However, a Timberland spokeswoman said Timberland did not ask Kingmaker to share the EU duties. She said Timberland alerted Kingmaker last year that it would stop placing orders after the end of this month.
"What is happening to Kingmaker is happening to other companies," said Edmund Sim, a partner at US law firm White & Case. "Even as I speak, international shoe brands are shifting orders to other countries like Thailand."
Of the five Chinese and 15 Vietnamese shoe factories Mr Sim represents in the EU anti-dumping case, most have lost orders from international brands or received threats of cancelled orders.
"My clients in Vietnam and China are laying off people. Who is to pay the anti-dumping duties is a very big issue causing EU importers to change their countries of sourcing," Mr Sim said.
A source said US shoe brand Wolverine had shifted substantial orders from China and Vietnam to Thailand, Indonesia and the Philippines since December.
For the six months to September last year, Kingmaker sold $265 million worth of shoes to Timberland, accounting for 37 per cent of the shoemaker's turnover.
"I don't think it's realistic to hope we can refill Timberland's capacity.
We cannot bear this burden of double-digit anti-dumping duties," Mr Chan said.
EU trade commissioner Peter Mandelson has proposed preliminary anti-dumping duties of 19.4 per cent on Chinese shoes and 16.8 per cent on Vietnamese shoes. The European Commission is widely expected to approve the duties later this month.
If Kingmaker shared the duties with Timberland, its net profit margin on Timberland shoes would fall at least five percentage points from 8 per cent, Mr Chan said.
Yesterday, a delegation of Chinese shoemakers met EU officials in Beijing, including the European Commission's trade defence director, Fritz-Harald Wenig.
"We told the EU officials it was unfair that all 130 Chinese shoemakers who applied for market economy status failed to qualify," delegation chairman Michael Wu Jenn Chang said. "Mr Wenig said he would relay our views back to Brussels. He admitted the EU was divided over this issue,"
Mr Wu said.