Has the spring gone in Nike's step?

By ANDREW GUMBEL

LOS ANGELES - These should be golden days for Nike.

Sales are higher than ever. New training shoes and running shirts are flying off the production lines. The company's list of sponsorship beneficiaries is the envy of the entire sporting world, a list that includes the two towering sporting legends of recent times, basketballer Michael Jordan and golfer Tiger Woods, as well as the double Tour de France champion Lance Armstrong and sprinter Michael Johnson.

On top of that, the Olympic Games have kicked off in Sydney, prime promotional time for any sporting goods company but in Nike's case, little short of a bonzer bonanza. The company's trademark swoosh logos will be adorning the entire Australian Olympic line-up, the United States women's soccer team, and a clutch of individual athletes.

And yet all is not nearly as well as it should be with the company and its free-wheeling image of athletic freedom. Far from basking in its position as the undisputed king of sportswear and sporting equipment, Nike is actually struggling to fight its way out of a two-year doldrum. Far from being able to exhort new young consumers to get the sporting bug, Nike seems to be antagonising as many people as it is attracting. The company has now become a bogeyman for the burgeoning movement against unfettered global trade because of its heavy reliance on cheap labour in Third World garment factories. This week demonstrators marched through Melbourne at the Asia-Pacific Economic Forum chanting: "Hey, Nike, you so bad. You so bad, you make me mad."

To the best of anybody's knowledge, the two sources of grief are not directly related. There is no evidence that the campaign against Nike's labour practices has put much of a dent in consumer demand, which has slowed down for other, easily identifiable reasons like the Asian economic crisis and the sluggishness of the US clothing market. It also does not appear that Nike's efforts to neutralise its human rights detractors, by offering pay rises and improved working conditions to at least some of its sub-contractors in Southeast Asia, have significantly raised the company's costs. Both problems strike at Nike's perception of the kind of company it is: one fixated on youth. Young companies grow fast and furious and are in tune with the times and sensitive to social concerns of the MTV generation. Nike is going through a phase of feeling distinctly middle-aged.

There is little to be ashamed of in its economic performance. Nike grew rapidly from $US4 billion ($9.1 billion) in sales to more than twice that, largely thanks to the input of Jordan and the successful marketing of sport as the quintessential middle-class aspiration. But the company has been treading water for a couple of years as it looks for the next opportunity to launch it on another upward sprint. In the last full financial year, which ended in May, the company posted a modest 2 per cent growth in revenue to around $US9 billion, with net profits up 28 per cent to $US579.1 million helped by internal cost-cutting. "For the last two years, growth has been a state of mind ... only," Nike's co-founder and chief executive, Phil Knight, wrote in the latest annual report. "Our revenues have not grown. We have given the familiar reasons - and they have been good ones - US industry cycle, the Asia meltdown, over-building in the US retail market, etc. But I am getting a little impatient for some revenue growth." Nike already has plans. One is to continue its international expansion: it already serves markets in 110 countries. Another is to keep capitalising on new sporting trends. With the commercial attractiveness of golf exploding thanks to Woods' exploits, Nike is in a prime position to clean up. A third plan is to move aggressively into women's sportswear. Outside California's beach communities, this is a market little exploited. Nike is talking in terms of doubling its sales to women in two years.

The labour conditions issue is thornier. The furore began three years ago, when factories used by Nike across Asia were found to be paying near-slave wages to men, women and children alike, demanding punitive overtime hours and employing intimidation tactics to crackdown on dissent or unionisation attempts. In one plant in Pakistan, 8-year-olds were found to be making Nike footballs.

Since the company's production involved around 500,000 people in the Third World, the findings triggered a major scandal, and even Knight was forced to concede that "the Nike product has become synonymous with slave wages, forced overtime and arbitrary abuse."

The company responded by signing protocols broadly in keeping with United Nations' guidelines on labour exploitation. It helped found the US Government's Fair Labour Association, signed the Apparel Industry Partnership Code and implemented reform measures, notably in Indonesia where it set a minimum age of 18 for footwear workers, gave them a 70 per cent pay rise and organised after-hours remedial education.

But if Nike hoped this would be enough to make the problem go away, it was soon disabused during last December's massive street demonstrations against globalisation in Seattle. Protesters jumped on top of a downtown branch of the Nike Town clothing and lifestyle store and kicked the letters of the shop name over one by one. Nike was denounced as an immoral multinational corporation and an enemy of basic human values, a line repeated over and over as young people have gathered to oppose the new world order in Washington in April, at the US political party conventions last month, and this week in Australia.

Activists have also kept up the intellectual pressure on Nike, accusing the company of hostility towards any attempt at unionisation, a right enshrined in UN guidelines on labour practices and one many labour experts believe is the only way garment workers can guarantee a wage they can live on and other survival essentials such as health care coverage and compensation for industrial accidents. One independent report on Nike factories in Indonesia, by the Australian group Community Aid Abroad, was published last week to coincide with the Olympics. Activists say gross abuses still continue on a wide scale. At one Thai factory, workers refused sick time were reported to be coughing or vomiting blood on the production line. In China, workers at the Hung Wah factory were found to be working 12 hours a day, seven days a week, and were sometimes forced to work through the night. One Salvadorean worker told anti-Nike activists she had just enough money to give milk to her daughter only once a month, despite working 12 hours a day and living in a cramped single room.

More broadly, the activists accuse Nike of window-dressing, hailing model factories and exemplary practices and trying to hush up the ugly truth elsewhere.

Knight says he did not invent the global economy, and many of the problems the activist groups complain about are, to some degree, out of his hands. He is right, to the extent that this is a debate Nike can never win. The company's economic rationale relies on its ability to produce its shoes and other items as cheaply as possible to make a massive profit. Now, a $US100 pair of sneakers may cost no more than $US5 to produce at their factories. Knight's personal net worth is estimated at more than $US5 billion.

The anti-Nike anger has had tangible effects at the level of student politics, more significant than it sounds when you consider the vast commercial reach of US college sports. Nike has severed its ties with two universities, Brown and the University of Michigan, which insisted it sign labour conditions stipulated by the pro-union Workers Rights Consortium.

Will Jordan and Woods be enough to propel the company to higher planes of achievement, or is Nike destined to start looking a little hollow? Tune in after the Olympics, and the answer may start to emerge.

- INDEPENDENT