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Vietnam factories work to restart production following violence

Published May 16, 2014

TAIPEI, Taiwan (BRAIN) — Taiwanese executives with factories near Ho Chi Minh City, Vietnam — where rioters looted or destroyed dozens of businesses including some in the bicycle industry — are expected to quickly get production lines back in operation barring further assaults.

And several executives told Bicycle Retailer and Industry News that the impact on future deliveries to the U.S. or Europe should be minimal since most Taiwanese-owned factories could shift production to facilities in Taiwan or China if necessary.

However, it appears rioters are heading north through the Central Highlands, where some 21 people were killed Friday, including 16 Chinese workers. And this Sunday marches are planned to celebrate Ho Chi Minh’s birthday on May 19.

Tony Lo, chairman of the Taiwan Bicycle Exporters Association as well as Giant’s CEO, viewed the riots in Vietnam as a short-term setback for producers that could cause some delivery problems down the line.

In an email, Lo pointed out that similar anti-foreign or anti-Chinese riots could happen in other developing countries like Cambodia, Bangladesh and the Philippines as long-simmering international disputes suddenly flare, sparking mob violence.

It was Beijing’s decision to move an oil rig into Vietnam’s territorial waters in the South China Sea near the Paracel Islands that sparked the current unrest. Vietnam historically has had a testy relationship with China, including a 1979 border war. The Chinese decision to confront Vietnam’s territorial claims generated broad anger throughout the country.

Specialized’s Bob Margevicius, who has a wide network of contacts throughout the industry, said he has talked with management at most of the factories damaged or threatened during the riots.

Most told Margevicius that much of the damage appeared to be focused on dormitories and offices rather than on manufacturing equipment. There was also considerable looting of computers and easily stolen articles, including bicycles, he said.

“I’m very impressed with the courage, leadership and strength that these companies’ employees have shown,” he said.

Despite the riots, Lo said some manufacturers would continue to seek countries where wages are low. “But strategy-wise, people should understand the risk of moving to new underdeveloped countries,” Lo warned.

Lo founded Taiwan’s A-Team, a 22-member group of key Taiwan suppliers, and has long advocated that Taiwanese companies focus their investments primarily in Taiwan and China. And Lo said he would again urge companies to strengthen their resources in those two countries.

But Lo also said more Taiwanese manufacturers should consider operating factories in North America and Europe to better “balance the risk.” Historically Lo could point to a long history of anti-Chinese riots spanning decades throughout the region including India, Laos, Cambodia, Indonesia, Myanmar, Thailand, Japan, Korea and others.

As for the situation in Vietnam, it appears from a variety of press reports and from contacts at TAITRA and others who spoke to BRAIN that only two companies suffered extensive damage.

Yuh Jiun Industrial is the Taiwanese parent company for Asama, a significant manufacturer of alloy bicycle frames at its Ho Chi Minh City factory. It was severely damaged and a number of complete bicycles were stolen.

It’s unclear whether Alhonga, a large brake supplier for the local market and for bicycles destined for Europe, had been badly damaged in the riots. However, its facility is near the Asama factory. Alhonga receives forged parts from its factory in Taiwan and then does brake assembly in Vietnam.

The DDK group’s Foaming Bicycle Parts, a saddle manufacturer, was also put out of business—at least for the time being. Bloomberg News reported that one technician at the factory may have died. The company’s president told the China Post that it has already rescheduled its orders to minimize losses. DDK has two factories in Vietnam.            Newspaper reports said Cheng Shin Rubber has also suspended its operations after its factory was damaged in rioting in Binh Duoug Province, also near Ho Chi Minh City. It’s uncertain when the factory will resume operations.

Astro, another Taiwan framebuilder that produces both alloy and carbon fiber frames at its Vietnam facility, was slightly damaged—primarily its office and computer systems were looted, said Mike Gann, Niner Bikes’ chief operating officer.

Astro is one of Niner’s longtime suppliers, but Gann said the interruption in operations there would have no impact on Niner’s delivery schedule. The company had several U.S. employees in Ho Chi Minh City when the riots broke out, but factory employees warned them to stay away, he said. Astro could resume operations by the end of the month.

Other companies like Taiwan-owned KMC, which mostly manufactures motorcycle chains in Bien Hoa, escaped damage, said TAITRA’s Andrea Wu. Kenda Rubber Industrial’s factory in Trang Bom also had no damage. Kenda’s chairman, Yang Ying-Ming, told a Taiwan newspaper that its factory in Dong Nai Province east of Ho Chi Minh City has already resumed operations. At one point protesters had surrounded the complex, he said.

 

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