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Mitt Romney Invests in Global-Tech Sweatshop in China

Does Mr. Romney seriously believe that young men and women in China are racing to climb over fortress-like walls topped with barbed wire, just to get a poorly paid job at Global-Tech? Or is it possible that the barbed wire and armed guards are meant to lock the Chinese workers in and strip them of their legal rights?

Preface by Charles Kermaghan

It is difficult to get a man to understand something when his salary depends upon not understanding it.

– Upton Sinclair

When Mr. Romney remarked excitedly,

“And uh, as we were walking through this facility, seeing them work, the number of hours they worked per day, the pittance they earned, living in dormitories with uh, with little bathrooms at the end of maybe 10, 10 room, rooms. And the rooms they have 12 girls per room. Three bunk beds on top of each other. You’ve seen, you’ve seen them? (Oh…yeah, yeah!) And, and, and around this factory was a fence, a huge fence with barbed wire and guard towers. And, and, we said gosh! I can’t believe that you, you know, keep these girls in! They said, no, no, no. This is to keep other people from coming in. Because people want so badly to come work in this factory that we have to keep them out. Or they will just come in here and start working and, and try and get compensated. So we, this is to keep people out.”

Does Mr. Romney seriously believe that young men and women in China are racing to climb over fortress-like walls topped with barbed wire, just to get a poorly paid job at Global-Tech?

Or is it possible that the barbed wire and armed guards are meant to lock the Chinese workers in and strip them of their legal rights?

Executive Summary: Betting Against American Workers – Mr. Romney and Bain Capital Invest in a Brutal Sweatshop in China

  • “When I was back in my private equity days, we went to China to buy a factory there.” Mr. Romney was a pioneer of outsourcing U.S. jobs and production to China.
  • At its peak, for two and a half years from April 1998 through August 2000, Mr. Romney and his Brookside Capital Partners Fund invested approximately $23 million in the Global-Tech sweatshop in Dongguan, China.
  • Mr. Romney was there when the Race to the Bottom in the global sweatshop economy was launched. Mr. Romney noted “the pittance they earned”— just 24 cents an hour in 1998 and less than $2.00 a day. Wages in Global-Tech were less than 2 percent of U.S. wages.
  • Despite his investment and power as Bain Capital’s CEO, Mr. Romney apparently failed to urge Chinese management to even modestly improve Global-Tech’s gross working and living conditions or the pitifully low wages of its workers.
  • If Mr. Romney had spoken up, conditions at Global-Tech might be far better today. Sadly, in 2012, Global-Tech remains a brutal sweatshop, where workers are paid starvation wages of $1.00 an hour and have no rights.
  • Today at Global-Tech, every single labor law in China is violated: primitive, filthy dorm conditions are the norm; routine 15- to 16-hour shifts prevail, along with grueling 105- to 112-hour, seven-day work weeks.
  • Eight hundred student interns — many exhausted children, just 16 years old — are forced to work the grueling 15- to 16-hour shifts with no overtime pay.
  • In the context of Mr. Romney’s present “get tough on China” stance, it would be critical for Mr. Romney to clarify exactly what he and Bain Capital did at the Global-Tech factory in Dongguan, China to push back against the evident abuses in the factory and to assure respect for human, women’s and workers’ rights.

Mr. Romney and Brookside Invest up to $23 Million in Global-Tech Sweatshop in China

“When I was back in my private equity days, we went to China to buy a factory there. It employed about 20,000 people. And they were almost all young women between the ages of about 18 and 22 or 23…. And they work in these huge factories, they made various uh, small appliances. And uh, as we were walking through this facility, seeing them work, the number of hours they worked per day, the pittance they earned, living in dormitories with uh, with little bathrooms at the end of maybe 10, 10 room, rooms. And the rooms they have 12 girls per room. Three bunk beds on top of each other. You’ve seen, you’ve seen them?…. And, and, and around this factory was a fence, a huge fence with barbed wire and guard towers.”
Boca Raton, FL, May 17, 2012
Global-Tech Appliances, Inc.
Galaxy Industrial Area
Qinxi, Dongguan
Guangdong, China 523565
  • 2 million square feet of manufacturing space.
  • In 2008, Global-Tech Appliances Inc. changed its name to Global-Tech Advanced Innovations, Inc.
  • Global Appliances Holdings Ltd. incorporated in British Virgin Islands 100%.
  • Global Lite Array (BVI) Ltd. incorporated in British Virgin Islands.

Mr. Romney Was Investing in the Outsourcing of U.S. Jobs and Production

Mr. Romney was clearly investing in the outsourcing of U.S. jobs and production.

In 1998, Mr. John C. K. Sham, Global-Tech’s President and CEO said, “…we still believe that the long term trend toward outsourcing will continue.” By mid-1998, Global-Tech reported fiscal year sales of $118.3 million, which was an astonishing 89 percent increase over the year before.

Global-Tech factory management was deeply steeped in the manufacture and export of well-known U.S. electrical appliances such as Sun Beam, Hamilton Beach, Mr. Coffee, Proctor Silex, Revlon and Vidal Sassoon. Mr. Romney had to be aware of this.

In its 2001 Annual Report, Global-Tech again focused on outsourcing:

“Household appliance companies are focusing on their primary strengths of marketing and distribution, while increasingly outsourcing product development and manufacturing….Our ability and commitment to develop new and innovative high quality products at a low cost has allowed us to benefit from the increased outsourcing of product development and manufacturing by our customers.”

According to a recent profile produced by Global-Tech: “The company has grown into the earliest large export-oriented investment business in Qing-Xi Town in Dongguan City…”

The company’s report filed with the U.S. Securities and Exchange Commission noted on March 31, 2012:

“The companies [Global-Tech’s factories] products are primarily sold to customers located in the United States of America (the “U.S.A.” or the “U.S.”) Europe and the PRC [People’s Republic of China].”

“Global-Tech and its subsidiaries (hereafter collectively referred to as the “Company”) is primarily a manufacturer of consumer electrical products, including but not limited to, floor care products and small household appliances, electronic and optical components, and is also involved in the assembly of cellular phones.”

Global-Tech refers to Motorola, Nokia, Sharp, LG and Lenovo as their “partners.”

Also, on August 30, 2001, right after Mr. Romney’s partnership with Global-Tech management, Global-Tech purchased the U.S. Lite Array company in Novato, California, which became a subsidiary of Global-Tech Appliances Inc. Then in 2003, Lite Array’s research and development team was moved to Global-Tech’s facilities in Dongguan, China. The Lite Array company was then incorporated in the British Virgin Islands so as to avoid all corporate, capital gains and estate taxes.

During its peak season, there are approximately 4,155 workers in Global-Tech’s Dongguan factories.

* Mitt Romney was the CEO of both Bain Capital and its affiliate, Brookside Capital Partners, of which he was also the sole director, president and shareholder.

Mitt Romney Is Responsible

Despite being a major investor for 2 ½ years in the Global-Tech factory and despite his power, influence and wealth as Bain’s CEO, Mr. Romney apparently failed to speak out urging Chinese management to improve the gross working and living conditions or the pitifully low wages of its workers. Why didn’t Mr. Romney raise the International Labor Organization’s core, internationally recognized worker rights standards with Global-Tech management?

If Mr. Romney had spoken up, conditions at Global-Tech might be far better today. Sadly, in 2012 Global-Tech remains a brutal sweatshop where workers are paid starvation wages of $1.00 an hour and have no rights whatsoever.

On April 17, 1998, Mr. Romney and Brookside Capital Partners Fund filed a report with the Securities and Exchange Commission noting that they had purchased a 6.13 percent stake, or 748,000 shares in the Global-Tech sweatshop factories in China. At $19 per share, Mr. Romney and Brookside had invested $14.2 million in one of the earliest outsourcers of U.S. jobs and products.

Just four months later, Mr. Romney and Brookside upped their interest in the Global-Tech factories to 10.3 percent, which, if the share prices remained the same, would be approximately $23 million.

Then, on December 21, 1998, Mr. Romney and Brookside appeared to downsize their Global-Tech holdings to 4.63 percent of their purchased shares. However, it appears that Mr. Romney was now sharing Brookside’s stake in Global-Tech with his Sankaty High Yield Asset Investors. According to The Atlantic Wire, “Sankaty is the Bermuda-based company Romney failed to disclose on financial statements for a few years, and then transferred to his wife’s name when he became Governor of Massachusetts.” (The Atlantic Wire, July 12, 2012, Connor Simpson)

Forbes also confirmed that “by the end of 1998, Brookside was sharing its piece of Global-Tech with Sankaty High Yield Asset Investors, the mysterious Romney-owned Bermuda corporation…” (Forbes, July 12, 2012, Frederick E. Allen)

By March 25, 1999, Romney, Brookside and Sankaty owned 9.11 percent of Global-Tech’s stocks.

It was not until August 2000, after 2 ½ years of investing in Global-Tech sweatshop factories in China, that Mr. Romney, Brookside and Sankaty sold their remaining shares.

Even after Mr. Romney left for the Salt Lake City Olympics in Utah, Securities and Exchange Commission filings “showed Romney remained Bain’s CEO, President and primary shareholder through 2002.” (Mint Press, July 17, 2012, Trisha Marczak)

Misery Updated: Global-Tech in China

Brutal and Illegal Sweatshop Conditions Persist at Global-Tech

Imagine if Mr. Romney had spoken up regarding the deplorable and inhuman factory conditions he saw in China. But instead, he came and went with no impact, other than growing his investments and wealth.

Grueling 105- to 112-Hour Work Weeks

As of August 2012, workers at Global-Tech were still toiling grueling 15 to 16-hour shifts, from 7:30 a.m. to 10:30 or 11:30 p.m. seven days a week. Workers were routinely at the factory 105 to 112 hours a week! And all overtime is mandatory.

Not including the two one-hour meal breaks each shift, the workers were toiling 91 to 98 hours a week, including the regular 40 hours of work each week, plus the added 51 to 58 hours of obligatory overtime — which exceeded China’s legal limit on permissible overtime by 514 to 587 percent!

It was only in September 2012 that the standard work shifts were cut back by half an hour, from 8:00 a.m. to 10:30 or 11:30 p.m., meaning the workers are now toiling daily 14 ½ to 15 ½ hour shifts. They are now at the factory 101 ½ to 108 ½ hours a week.

The current obligatory working hours still exceed China’s legal limit on permissible overtime by 472 to 556 percent.

Global-Tech also routinely violates China’s law on the “Regulation of Wages.” In Guangdong Province it is mandatory that workers’ pay stubs clearly document all regular and overtime hours — including weekend hours worked during the month, which Global-Tech management blatantly fails to do.

It’s Forced Overtime, No Matter How You Look at It

We can imagine Global-Tech management saying: “Oh no. All overtime work is voluntary and in strict accordance with the law.”

Of course, workers can opt out of working overtime any time they want. But we hope they are independently wealthy. No matter what the emergency, workers who cannot stay to work overtime hours are punished with a “major demerit point” and fined 90 RMB, or $14.26, which is the equivalent of losing 14.3 hours regular wages. No worker can possibly afford such crippling fines.

Global-Tech management can pretend all they want that overtime is voluntary. Every worker knows that if they start skipping overtime, their wages and “rewards” will be slashed.

Below Subsistence Wages

China’s workers earn just $1.00 U.S. an hour, less than six percent of U.S. wages.

As of 2012, U.S. wages for the manufacturing of electrical equipment and appliances are $17.93 an hour, while wages in China for similar work are just $1.00 an hour, which means that wages in China are just 6 percent of U.S. wages.

Workers at Global-Tech are also nickel and dimed and cheated of their legal overtime pay.

According to China’s law, all overtime hours worked on weekdays must be paid at a premium of 9.48 RMB per hour, which amounts to $1.50. On weekends, all working hours are classified as overtime and must be paid at a premium of 12.64 RMB, which is the equivalent of $1.99 per hour.

But Global-Tech management still finds a way to nickel and dime the workers, cheating them of eight cents an hour on weekday overtime and ten cents on weekend overtime.

At a minimum, workers must toil at least three hours of overtime each weekday after their regular eight-hour shift. So for their three hours of overtime, five days a week, the workers are cheated of $1.20 each week. (3 hours x 5 days = 15 hours OT; 15 x 8 cents = $1.20.)

On weekends, the workers are required to toil the same standard 13 hours of work on both Saturday and Sunday, which adds up to 26 overtime hours. As the workers are cheated of 10 cents per hour of their legal overtime pay, they are losing another $2.60 per weekend.

So, routinely each week, working a grueling seven-day work week, the workers are rewarded by being cheated of $3.80 a week, which amounts to taking blood money from some of the hardest working and poorest workers in China.

The overtime wage that was paid on weekdays at Global-Tech was set at 9 RMB ($1.42) an hour, in violation of China’s Labor Contract Law, which stipulates that all weekday overtime must be paid at 9.48 RMB ($1.50) and hour. It was not until mid-September 2012 that Global-Tech began paying the legal overtime premiums.

Child Labor Persists

There are approximately 800 high school student “interns” — aged 16 to 18 years old — working at Global-Tech during the summer months. The “student interns” are typically at Global-Tech for two to three months, and work right alongside the regular workers. The only difference is that the student workers — no matter how many hours they work at night or on weekends — always get paid the same standard hourly wage. There is no holiday or overtime premium wage for them.

By law, student interns are strictly prohibited from working more than a regular eight-hour shift, Monday through Friday. But this does not stop management from forcing the exhausted young students to toil 14 ½ to 15 1/2 –hour shifts, from 8:00 a.m. to 10:30 or 11:30 p.m., seven days a week. The students are routinely in the factory over 100 hours a week, while toiling 87 ½ to 90 hours.

Many students curse their teachers and call them “liars.” They say their schools and teachers “tricked us to come to this place.” Their teachers told them they would “learn important skills here” and “easily make enough money to pay for [their] upcoming school tuition. All of it was a lie.

The students must solder a circuit board onto a monitor every 13 seconds. First they clean the monitor using ethanol. Then they place it onto a mold. Pressing down using both hands, they operate the machine that solders the circuit board onto the monitor. Then using a microscope they inspect the monitor for quality and place it back on the assembly line. They do the same operations over and over again, one every 13 seconds, 280 monitors an hour, 3,920 in 14 hours of work.

Student Interns Denounce the Gross Violations at Global-Tech

  • “Now we know this place is hell. We can’t leave. Otherwise we’ll have trouble getting our high school diplomas. And we won’t get paid for our work. The schools and teachers get money from the factories. The schools, teachers and factories are together drinking our blood.” (Student Intern A)
  • “With the help of our teachers, they [Global-Tech management] are even more ruthless with us than with regular workers. Because we are young, we don’t have any job experiences.

“We get so tired every day that we just want to die. We never get enough sleep. Every day we go to work without getting rid of the tiredness in our bodies. And we start a new tiring day. We are tired and sleepy every day. Sometimes we really want to doze off on the assembly lines. But the supervisors walk around the assembly lines all the time. Nobody gets a chance to take a nap. I really want them to get a stroke and pass out so that I can take a nap on the assembly line. Even just a minute would be great!

“We dare not tell our parents about this. My parents love me so much. If they knew I suffered like this here ever day, they would be heartbroken.

“Sometimes I think to myself: Doesn’t our boss have kids? If he has kids, are his kids forced to live such a poor and difficult life as we do?” (Student Intern B)

Primitive and Filthy Dorms at Global-Tech

Twelve workers share each primitive dorm room, sleeping on narrow, double-level bunk beds, most without even the thinnest of mattresses. The dorms are filthy, and it is common for workers to find dead rats in their rooms and hallways.

Two 40-watt bulbs dimly light the room. Each dorm room has a “bathroom,” and a squat toilet which is right next to the “shower.” To bathe, the workers must queue up with their small plastic buckets and wait their turn to fetch hot water at the spigot in the hallway. It takes more than an hour for all 12 workers to bathe, which they do by splashing water on themselves right next to the squat toilet. Frequently the hot water runs out and the workers near the end of the line must wash with cold water. After everyone has washed, the workers spend another hour washing their clothes by hand.

This means that if the workers are lucky enough to get out of work at 10:30 p.m., it still takes another two and a half hours or so for everyone to bathe and wash their clothing. They can finally stumble to their bunk beds to sleep at 12:30 or 1:00 a.m.

The dorms do not have air conditioning. There are just two small ceiling fans in each room, which provide little relief. So during the long, humid summers, workers are drenched in their own sweat, making it very difficult to sleep.

The Workers’ Cafeteria Is Beyond Filthy; Barely Edible and Frequently Rotten Food

All the workers complain that management cheats them of sufficient cooking oil, leaving their food with little taste. But what is far worse is that they often find bugs, sand and leftover “juice” from rotten vegetables in their food. The cafeteria is filthy, and rarely if ever properly cleaned. Flies are everywhere.

More often than not, the food is inedible. No matter how hungry they are, the workers cannot stomach it. So workers protest nearly every day by dumping uneaten food on the cafeteria tables.

In the photographs smuggled out of the cafeteria, you can see piles of rotten food dumped on almost every dining table.

Management does not bat an eye, and has no intention of improving the food.

Workers complain that the food at the cafeteria is awful. It has little taste, and is often contaminated with bugs, sand and “juice” from rotten vegetables. On days when the food is especially bad, the workers protest by dumping it on the cafeteria tables.

Workers wake up to a water breakfast of noodle soup. Lunch consists of cabbage, stir fried pickles, regular and pickled vegetables and green beans. Dinner is comprised of noodles, vegetables and seaweed. The only serving in the cafeteria which is not limited is the rice. Other than rice, workers are limited to a single serving of all the other food dishes, and the portions are quite small, as one can see in the clandestine photos.

Global-Tech Workers Have No Hope for Their Future and See No Possibility of Change

Our researchers asked two workers: “Do you think life will be this hard in the future? Are you going to live like this for the rest of your life?”

One worker responded, “We can’t think about it. Because if we do, we might not have the courage to live to see tomorrow’s sunrise.

The other worker responded, “Maybe we don’t make as much back home, but we don’t work so hard and life isn’t so difficult. We wouldn’t be ordered around by others as if we are livestock and slaves. At the very least we would have family that care and console us. Here we do not know other people well. We are not respected. We work so hard around the clock to live a pitiful life. My parents worked so hard for most of their lives to raise me and let me go to high school, hoping I would have a better life. Turns out my life isn’t much better than my parents’!”

Workers Can Easily Join the Global-Tech Factory, but Getting Out Is Another Story

This is how the system operates: Wages are withheld. For example, after working through the month of August, the workers are not paid at the end of the month, on August 31, but rather must wait another three and a half weeks to be paid their August wages on September 25. Similarly, after working through the month of September, the workers are not paid until October 25, and so on. Workers can quit, but management will do everything it can to keep the workers waiting for weeks to receive their last month’s wages including all forced overtime — and they may never see their final three and a half weeks’ wages. Few workers can afford to walk away and forfeit so much of their time, grueling workloads and wages.

One worker told us that of eight workers who were hired together at Global-Tech, six fled within a month, and the remaining two are only waiting to get August’s salary before quitting. The workers may escape, but they will still have to forfeit 25 days’ wages for September.

Global-Tech Workers Also Cheated of Healthcare and Other Benefits

China’s labor laws are very clear. It is mandatory for the Global-Tech management to inscribe its workers in the social insurance programs within 30 days of a worker’s employment. The mandatory insurances cover: pension, unemployment, occupational injury, maternity, medical insurance and a housing stipend.

It is a flat-out lie for Global-Tech management to say that it is “legal” to delay a worker’s inscription in these mandatory insurances until they complete at least one full year of work.

As a cover, Global-Tech management does inscribe its workers in an extremely limited and cheap private social insurance scheme which costs 6.7 RMB, or a whopping $1.06 a month.

Gross Violation of Guandong Province’s Regulations on Payment of Wages

Global-Tech management intentionally and illegally fails to list all regular and overtime hours worked each month. Nor are the regular and overtime wage rates clearly stated.

We estimate the workers toiled 173.33 regular hours in June, and 205.8 overtime hours, for a total of 379.13 hours.

This worker earned $271.68 in take-home pay in June and approximately $62.70 for the week, including the excessive forced overtime.

Management deducted 150 RMB ($23.68) from the worker’s wages each month, despite the fact that the food management served was often inedible and frequently rotten.

Management’s blatant failure to note all regular and overtime hours worked each month or the wage rates applied is illegal, meaning that Global-Tech management must have powerful friends in local government who take care of them.

Social Insurance System in China

The Social Insurance system in China is controlled at the municipal or provincial level.

Here too, sweatshop factories like Global-Tech’s in Dongguan can routinely violate the regulations, which exist on paper but not in reality.

The Global-Tech company is 100% responsible for:

  • Work-related injury insurance, —Violated
  • Maternity insurance, —Violated

Mandatory insurances for which management and employees are jointly responsible:

  • Personal insurance —Violated
  • Medical insurance —Violated
  • Unemployment insurance —Violated

Global-Tech in China: “One of the Strictest Labor Laws in the World!”

This is certainly a “Tale of Two Cities” where Global-Tech management states that the Chinese government’s Labor Contract Law is “considered one of the strictest labor laws in the world!” But this would come as a shock to Global-Tech’s over 4,000 workers, who are forced to toil grueling hours, seven days a week, under brutal sweatshop conditions, where every single labor right on paper is grossly violated.

China’s Labor Contract Law went into effect on January 1, 2008, and was meant to “regulate the hours employees may work on a daily and weekly basis; regulate working conditions such as safety and hygiene; and provide for various social welfare and employment benefits,” all of which is a complete fantasy given the brutal sweatshop conditions the Global-Tech workers endure.

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