Nike, Adidas output snarled as Covid shuts Asian factories

The delta variant surge has hit Southeast Asia especially hard. Picture: Bloomberg

Some of the world’s biggest footwear and garment companies are seeing production pinched as factories in Southeast Asia struggle to keep the lights on amid one of the world’s deadliest Covid-19 resurgences.

A number of firms that churn out products for global giants like Nike and Adidas have reported plant suspensions in Vietnam over the past few weeks as authorities impose restrictions to stop the virus. Other industries, such as Toyota factories in Thailand, also are scaling back as multiple countries in the region see record high cases and deaths.

“It’s going to be worse before it gets better," said Deborah Elms, executive director of the Singapore-based Asian Trade Centre. "Places like Vietnam that largely avoided locking down cannot maintain an open posture. With vaccinations painfully slow, I assume more shutdowns in factories, with the ripple effects felt elsewhere.” 

The temporary shutdowns come as assembly lines gear up for the holiday shopping season in the US and Europe. Delays could mean shoes, suits, sweatshirts and other clothes won’t be on department-store racks by Thanksgiving Day and Black Friday, the traditional kickoff for the holiday shopping season, said Michael Laskau, founder of Ho Chi Minh City-based Paradigm Shift, which works as an intermediary between manufacturers and overseas customers.

The delta variant-driven surge has hit Southeast Asia especially hard, underscoring the delicate choices for policymakers who are balancing vaccination drives and mobility restrictions while trying to keep their economies afloat.

The manufacturing pain is especially acute in Vietnam, where officials have taken drastic steps to ensure factories can continue operating. In some instances, electronics and tech companies have had workers sleep overnight on-site.

The garment industry, with lower profits and more workers, hasn’t been able to replicate that effort.  Phan Thi Thanh Xuan, vice chairwoman of Vietnam’s Leather Footwear and Handbag Association, said that more than 90% of the group’s 800 members among shoe manufacturers and exporters in the country’s south have temporarily halted operations. “Most of the factories that supply Nike and Adidas in Vietnam have suspended output,” Xuan said. 

Xuan said the association is asking the government to allow companies to source their own vaccines, which currently are distributed by the government.

“The health and safety of our teammates, as well as that of our suppliers, remains our top priority,” Nike said in a emailed statement. “We continue to work with our suppliers to support their efforts in response to the dynamic and unprecedented nature of Covid-19.” Adidas declined to comment, citing a “quiet period” companies take before reporting earnings, which it will do on Aug. 5.

Bloomberg