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Critic: With iPhone 5 Launch, Tim Cook Blows Major PR Opportunity

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The head of a corporate watchdog accountability group says Apple has missed the moment to make its products more attractive to American buyers.

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MINYANVILLE ORIGINAL With the launch of iPhone 5, Apple (AAPL) CEO Tim Cook is missing an opportunity to make an important statement, says Taren Stinebrickner-Kauffman, executive director of corporate accountability watchdog group Sum of Us.

"Apple is hoping the buzz around the iPhone 5's release will drown out criticism, but as demand for iPhones has increased, so has the demand for faster and cheaper production, and factories churning out phones are also churning out forced unpaid overtime, wage cuts, and hazardous working environments," she said in a statement.

Criticism has not been completely muted, of course. Most notably, a Shanghai newspaper just published its own sort of tribute to the iPhone 5 by sending a veteran journalist undercover inside a factory run by Apple supplier Foxconn. See a translation of the story -- with fresh images from within the factories and dormitories -- at M.I.C. Gadget.

On the heels of China's latest suicide report this June, the public in China and the US was alerted to allegations -- denied by Foxconn -- that the company was using an "internship" program to secure unpaid work from Chinese students specifically hired to produce new USB cables for the iPhone 5. Students who quit would lose school credit, according to several sources. Here's China Daily:

"The university told us it's a good way to experience corporate culture," the 19-year-old said. "Even though many of my classmates are reluctant to go to Foxconn, our teachers still asked us to work there starting in August." She added that almost all the vocational schools in the city, including some related to food science and finance, have sent students to Foxconn, Apple's largest supplier. Her university provided more than 3,000 students.

This year in Brazil, unionized workers at new Foxconn factories began earning more than twice the average salary of their Chinese counterparts, meaning they might actually be able to afford the products they assemble. (Labor activists point to Brazil's model as proof that Apple can do better by its international supply chain employees, though even in Brazil, workers have voiced complaints about overcrowding, poor food, and a lack of drinking water.) Why isn't the same pay, at least, possible in China? According to Stinebrickner-Kauffman and other activists, it is.

Minyanville spoke to Stinebrickner-Kaufmann about her grassroots campaign.

What are your specific goals with the ethical iPhone project?
One of the very specific goals is that we want Apple and Foxconn to be abiding by China's labor laws, which they're not. In the spring, a Fair Labor Relations report confirmed that there's massive forced overtime at Foxconn, that goes well beyond Chinese labor law. Apple said, Well, we'll fix it by 14 months from now. It's astonishing that you can go around saying, "Yes, we know we're breaking the law, and we're just going to do it for another year. We're just going to keep doing it for the next 14 months."



There's a couple of reasons why there are routine violations of these labor laws. One of the bigs ones is that workers can't make a living wage without working overtime. That's why wages have to come up. If workers are working 40 hours per week plus 25 hours of overtime, which is the legal overtime limit, they're still not making enough to support themselves.

Our problem with excessive overtime is not just about, "Well, it's nice for people to have leisure time." When you work a 12-hour shift in a factory, the physical harm it does to your body -- when you're doing these repetitive motions and potentially breathing in toxic fumes -- is enormous. There's an impact on the body.

The other reason there's so much overtime, especially in the lead up to a product launch like iPhone 5, is that Apple demands massive flexibility and massive productivity during those time periods. There's a famous story that led off the New York Times investigative report on this: Steve Jobs decided [six] weeks before the first iPhone was being launched that he wanted a glass screen instead of a plastic screen. They had to retool the entire assembly line to change all the phones for that launch.

Apple either needs to be willing to pay to have factories with extra capacity or they're just going to have to wait 10 weeks instead of five weeks for those kinds of things. The cost of doing that -- to forcing that kind of massive capacity surge -- is an enormous human cost.

Has that been true for the iPhone 5 launch?
We don't have direct evidence of it for the iPhone 5. It's very hard to get interviews with these workers. They live in the company dormitories. But it would be very surprising if there were not massive amounts of overtime work right now.

Speaking of employee interviews, has the Mike Daisey debacle made it difficult for you to get your message out?
I think everyone agrees that he shouldn't have presented his work as living up to journalistic standards. I do think it has muddied the waters in really unfortunate ways because the truth is that most of the allegations he was presenting about the working conditions are true. But it's made it confusing for the average consumer who heard the topline of "Mike Daisey was making this stuff up," and then dismisses all of the facts. The facts have been repeatedly proven time and time again over the last decade by independent researchers.



Do you speak directly to Apple's shareholders? What are the responses?
We work a little bit with shareholders. We held a rally under the annual stock meeting in February in Cupertino. It's a ways away from the Bay, and it's not a large town, but we still had about 35 people show up for a couple of hours. We haven't proposed a resolution around this, but it's certainly something we would consider for next year, especially if Apple continues to refuse to address this situation.

What do you hear from American consumers on this topic?
I think that what most consumers really understand is that there is just no reason that Apple can't continue to make the products they make and treat their workers well. People want to feel good about buying Apple products. That's the brand Apple has built.

So what's the disconnect? Why haven't we seen a major consumer backlash?
I think there is mounting consumer awareness, but you have to remember that these technologies lock you in. It's not an easy switch. You've bought your iBook or your iPhone and you've invested in their products. I'm not going to say it's as hard as switching banks, but everybody knows that banks do horrible things but most people don't take their money out of banks, right?

Why are you focused on Apple? Are the makers of Androids (GOOG) or other phone makers any better?
Apple is a company that can fix the problem, which gives them a special moral imperative to do so. But the truth is that other phones are not made under significantly better conditions. So given that you're going to have a phone, the argument for switching is not so much that the other phones are made better, it's that Apple has the opportunity to make their phones better, and they're not. Apple is operating on massive profit margins and is the 800-pound gorilla. If Apple says to a supplier that it wants something changed, the supplier will change it, whereas if Samsung (SSNLF) or another company says they want something changed, the supplier might resist.


As this story went live on our site, Apple's stock price was hovering around $665 and was expected to head upwards. Reviews were starting to flood tech blogs about the new phone's taller screen, more colorful display, and thinner design. An analyst at JPMorgan has said he believed the iPhone 5 could potentially add between 1/4 and 1/2 point to fourth quarter annualized GDP growth.


More tech coverage from Minyanville:

Analysts Expect Record-Breaking iPhone 5 Sales, but Will It Help Mobile Carriers?

Wait a Minute! Did Facebook's Mark Zuckerberg Really Say Anything New?

Tech News: Oops, Apple Search Engine Reveals Secret Product Names


No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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