Subaru Must Begin Holding Its Suppliers Accountable

In the past four years, Subaru’s U.S. sales have almost doubled and its stock price has quadrupled. Yet most consumers don’t know that a large part of the company’s manufacturing force is made up of migrant laborers from Asia and Africa, who report abuses by factory owners and labor brokers in Japan.

Reuters conducted an in-depth investigation of Subaru’s suppliers and labor brokers in the company’s main production center, Ota, an ethnically diverse city in the Gunma region of Japan. The report reveals that Subaru’s suppliers rely on a system in which foreign workers, recruited from countries including Bangladesh, Nepal, Mali, and China, earn about half the hourly wage of Japanese workers. Labor brokers also charge them up to one-third of their salaries for living expenses.

Many on temporary visas are unable to switch employers once they arrive in Japan, enabling further exploitation.

Japan’s labor market is troubled by a shrinking national population and severe barriers to legal immigration. Construction, agriculture, and manufacturing companies and their suppliers find themselves pressured to turn to undocumented workers to provide cheap labor.

Reuters found that there are around 28,000 people working for Subaru’s suppliers in Gunma. Many of these are asylum seekers, visa overstayers, and “trainees”—contract employees who are recruited to come to Japan and learn industrial skills.

Subaru saves about $3.8 million annually by employing 339 trainees from China. These workers are mostly in their 20s, most on one-year contracts, and earn about half of what Japanese workers make. Subaru houses the trainees in Ota apartments, two to a room, deducting rent, utilities and other living expenses from their pay. Most trainees have also paid up to $3000 to labor recruiters before even arriving in Japan. Many said they were warned that speaking about their working conditions would cause them to be fired.

Asylum seekers also make up a large portion of Subaru’s workforce in the Gunma region. Most asylum seekers have work permits that are renewable every six months, but some are working without permits while on provisional release from immigration detention.

Japanese officials say that this group of asylum seekers should rely on family, friends, and local charities to support them, or otherwise leave the country. But after fleeing their home countries due to political or religious oppression, going back usually isn’t an option. And barred from working legally, they must find other ways to make due. One such worker, Abu Said Shekh, told Reuters, “I have to stay here and I need money to buy food. I just want to be treated like a human being, not a dog.”

Foreign workers frequently endure abuse. Some report being pressured to work double shifts, getting fired after suffering workplace injuries, and living without health insurance. At one factory, workers were expected to cover car headrests with leather by hand. Some lost fingernails, and many were unable to close their fists after working a shift. While most were paid the minimum wage—$6.60/hour—over a dozen Indonesian laborers told Reuters they made about $3.30/hour after living expenses were deducted by Japanese labor brokers and recruitment fees were paid to recruiters back home. Some brokers make millions of dollars by placing workers at factories after courting factory owners in an effort to win labor contracts.

Subaru’s parent company, Fuji Heavy Industries Ltd, says that its suppliers are responsible for their own labor practices, and that parent companies are not directly involved in determining working conditions in factories abroad. In turn, suppliers say that labor brokers throughout Japan and recruiters in workers’ home countries are the ones responsible for any exploitative practices.

Manufacturers in Ota supply parts to other car companies as well, like Toyota, Nissan, and Honda. Yet Subaru is unique in that it makes 80 percent of its cars in Japan. Subaru says it is unable to directly monitor labor brokers working for suppliers, but it acknowledged that it could change the terms of contracts with suppliers in order to compel compliance with labor standards. The company has begun to ramp up production in Ota, causing suppliers to scramble even more to obtain workers and keep up with Subaru’s expansion, making it even more critical for Subaru to update the terms of its supplier contracts to protect workers.

Companies must begin to monitor their supply chains for exploitative labor practices, including underpayment of wages and hiring through brokers and foreign recruiters. This is especially true for companies such as Subaru, who heavily rely on a manufacturing force that is concentrated in regions with weak protections for vulnerable migrant laborers.

In this case, Subaru itself identified one of the key ways it could make a change—using its purchasing power to hold suppliers accountable and prevent intermediaries like labor brokers from exploiting vulnerable workers. Subaru must assertively make those changes to begin to reduce human trafficking in its own supply chains, and assume the responsibility of all multinational companies to aggressively manage production operations to ensure they are not enabling the massive growing global problem of slavery.

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Published on August 15, 2016

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