By  on August 1, 2012

SHANGHAI — Chinese manufacturers are threatening to take legal action against Adidas-Salomon AG over the German sportswear brand’s decision to close its last wholly owned factory on the mainland as well as end contracts with five of its suppliers in the country.

Shanghai Manlang Textile Co. Ltd. says Adidas did not provide enough advanced notice prior to ending its business with the manufacturer. Sun Yingli, founder of Shanghai Manlang Textile, said Adidas “abruptly” terminated its contract with her factory in April. “According to the agreement, there would be no change in our cooperation before 2015,” she said, adding that if Adidas were to cancel its contract, the brand agreed to give six months notice so that suppliers could look for other clients.

Yingli said that Adidas makes up nearly 30 percent of the factory’s business and that the manufacturer has invested in machinery that is specialized for Adidas products. She said the factory had also signed labor agreements with workers until 2015. “Adidas requires a high degree of stability from their suppliers,” she said. “We have to make sure we are prepared.”

Adidas said it has “given fair and proper legal notice” to its partners and suppliers for the termination of contracts. “We have fulfilled all of our contractual obligations but will nevertheless support supplier partners with consultative advice in their communication and transition plans,” the company said in a statement.

Yingli said that Shanghai Manlang Textile has been contacted by Adidas to negotiate compensation, but if both sides cannot reach an agreement the supplier may take legal action.

Last week, Adidas said it would close its factory in Suzhou, a city outside of Shanghai, in an effort to give the company a “consistent sourcing structure, which will help us to leverage scale and reduce complexity,” the sportswear brand said. The Suzhou manufacturing center has 160 employees.

Adidas said it is not relocating the factory to another market, such as Vietnam and Cambodia, which are becoming increasingly competitive outsourcing hubs for brands as labor costs increase on the mainland. “China has been and will remain a key sourcing market for the Adidas Group,” the company said. “Adidas partners with more than 300 supplier factories in China, and our commitment to China remains.”

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