Saturday, November 17, 2012

IKEA: No deep business contacts with Cuban suppliers

Posted on Friday, 11.16.12

IKEA: No deep business contacts with Cuban suppliers

Test sofa sets were of such poor quality that no orders were placed,
IKEA says.

Furniture giant IKEA did not know about the possible use of Cuban prison
labor to manufacture goods for its stores and did not have a long-term
business relation with suppliers on the island, investigators announced

The Swedish company issued an apology after an audit by the Ernst &
Young firm confirmed reports that some suppliers used forced prison
labor, including many political dissidents, in communist-ruled East
Germany in the 1980s.

"We deeply regret that this could happen," in East Germany, manager
Jeanette Skjelmose said in a statement. "The use of political prisoners
for manufacturing was at no point accepted."

But the Ernst & Young report noted that IKEA "never had any long-term
business relations with suppliers in Cuba and … there is no evidence
that [the company] was aware of the possible use of political prisoners
in Cuba" to manufacture its products.

The auditors found that 71 sofa suites — a sofa and two matching chairs
— were produced in Cuba as samples for the Swedish company and at least
one set was sent to the former East Germany for quality inspection by
company officials, the report added.

"The furniture did not meet quality requirements," noted the report,
released in Berlin on Friday. "There is no evidence that the IKEA Group
received other products produced in Cuba."

News reports earlier this year showed IKEA officials in West Germany
contracted East German state companies that used prison labor to
manufacture some of its products in the 1980s. The East Germans in turn
explored hiring Cuban government enterprises that use prison labor to
manufacture some products for the Swedish firm.

The Cuban enterprises have been identified as EMIAT and PROVARI, both
run by the Interior Ministry, in charge of the island's prisons. PROVARI
runs prison manufacturing plants, and EMIAT commercializes the products.

A Cuban government radio report on PROVARI's work in 2011 said it was
established 20 years before "principally with the objective of offering
work to prisoners . . . and integrating them into work useful for society."

Rainer Wagner, head of a group of victims of East Germany's communist
government, told a news conference in Berlin on Friday that he hoped the
furniture company would consider compensating former prisoners for their
forced labor.

IKEA said only that it would make a "financial contribution" to Wagner's
group for its "scientific research project on forced labor" in East
Germany, which officially disbanded after the collapsed of the Berlin
wall in 1989.

East Germany desperately needed hard currency to support its
Soviet-style economy in the 1980s, and its prison labor is estimated to
have cost a tenth of what it would have cost in the West, according to
one Associated Press report.

Many countries, including the United States, use prison labor. But
there's concern that dictatorships can too easily abuse their prisoners.

Ernst & Young said its investigators examined about 20,000 pages of IKEA
documents and 80,000 items in official German archives. They also
interviewed about 90 active and retired IKEA employees and witnesses
from East Germany.

The furniture firm hired the auditors in May to carry out an independent
audit of its East German and Cuba connections, and IKEA U.S. President
Michael Ward met with Cuban Americans in the U.S. Congress in June to
assure them the inquiry was a priority.

"I commend IKEA's serious investigation into its past contacts with the
brutal, oppressive Castro dictatorship," said Rep. Mario Diaz-Balart,
R-Miami. "Other businesses with objectionable past behavior or shameful
business relationships should take note that facing the truth is better
than attempting to bury it."

Rep. Ileana Ros-Lehtinen, R-Miami., added that the IKEA case shows
"companies, not just dictators, that if they engage in these acts they
will be held accountable."

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