Investigation suggests workers at Shimano's supplier subjected to “slavery-like” exploitation

The Malaysian supplier of Shimano, the world's largest bicycle component manufacturer has been accused of subjecting workers to intense exploitation and unlawful practices, including physical abuse and threats — conditions which have been described as "modern slavery" by a British labour rights rights specialist.

An investigation by The Telegraph has suggested that the Kwang Li Industry, based in Pekan Nanas in Malaysia, which is responsible for supplying the Japanese company with crucial components and regards itself as an "outstanding" Shimano vendor, was involved in employing migrant workers and putting them through a list of derogatory working conditions.

The Malaysian supplier has been recruiting workers from some of the world's poorest countries, such as Nepal and Bangladesh, with the promise of well-paid jobs  while charging them an expensive recruitment fee, as the bike industry boom during Covid saw unprecedented consumer demands leading to higher production, resulting in the supplier requiring a larger workforce than ever before.

In January and February 2023, Kwang Li Industry recruited 207 Nepal and tasked them with assembling Shimano's expensive and highly esteemed range of groupsets, the likes of which are not only used by some of the best pro cyclists in the world but are also found in day-to-day commuter bikes.

The Telegraph's investigation, conducted via first-hand interviews with current and former workers at Kwang Li, inferred that as more and more people around the world took up cycling during the lockdown, the demand percolated throughout the bike industry's supply chain as Shimano, which is the world's largest component manufacturer for bicycles — and their smaller suppliers – became inundated with orders.

> Class-action lawsuit filed against Shimano for "inadequate" cranksets that put "cyclists nationwide at risk of injury"

In light of these recent findings, Shimano said that it has launched an investigation into Kwang Li and said it is working to remediate the workers “as soon as possible”.

The recruitment fee charged to the workers is often paid through high-interest loans, and upon arrival at the industry, they are stripped of their passports and typically housed in poor company accommodation. Many are abused and paid below minimum wage.

2023 Shimano Ultegra Broken Crank

"Modern Slavery"

Labour rights specialists have said that this behaviour met several of the International Labour Organisation's indicators of forced labour and was "akin to modern slavery", and fear that the workers will be further exploited as they seek to pay off their debts.

According to the report, many workers were paid their wages only partially, with money being deducted for activities like "using the factory canteen" and were even issued with unpaid suspensions for making mistakes or failing to meet production targets.

Factory managers have threatened the workers with deportation back to Nepal "if you cannot meet a target", the workers said.

On one occasion, a Bangladeshi worker was struck across the face by his supervisor for making a "very small mistake", according to two workers who said they witnessed the incident. The man was subject to further verbal abuse by one of the factory managers, they say, and later suspended for a month without pay.

The ILO also considers threats and acts of this nature – “strongly” denied by Kwang Li – to be an indicator of forced labour.

> Shimano allegedly hit by massive ransomware attack threatening to release confidential data

Effects of bike industry's recent turmoil

For the year 2021, sales and profits of Shimano's bicycle division soared as demand for bikes boomed during the pandemic, with the Osaka-based manufacturer's turnover up by almost half to come around £2.8 billion. The next year, the company declared a record revenue of around £3.2 billion.

However, in its most recent financial reports, Shimano's sales and revenue have continued to fall drastically, with its on-paper performance being even worse despite already lowered projections, as demand for new bikes and components has slowed down since the pandemic.

Readers of road.cc would also know that the lowered demand has led to serious supply-chain issues and a growing turmoil in the bike industry for the whole of 2023.

> Bike industry turmoil: Shimano says global cycling market remains “weak” as segment sales fall by a quarter – and worse to come?

As a consequence of this, Kwang Li, which has been looking to cut costs amid falling demands, is alleged to have forced 82 workers to resign over the summer – nearly 18 months before the conclusion of their two-year contracts.

One former factory worker, who moved over from Nepal to Malaysia in January, said he had been forced to resign after just six months of work because they didn't have any work for him, despite him taking out a loan worth 300,000 Nepalese rupees (around £1,800) to pay the recruitment fee.

Sian Lea, Business and Human Rights Manager at Anti-Slavery International, said the allegations "bear all the hallmarks of how employers, and others, can exploit migrant workers and trap them in modern slavery".

She added: "Recruitment fees, in particular, have long been identified as a critical driver of modern slavery."

A spokesperson for Shimano said: "This is a serious accusation and it stands against what we believe in at Shimano. We are currently investigating the matter with the relevant parties and will use appropriate action to ensure the situation is resolved."

A spokesperson for Kwang Li Industry said: "We vehemently deny all the false allegations made against us ... this includes but not limited to the allegations of physical abuse and threats, illegal salary deductions and recruitment fees, and unpaid suspensions.

"We wish to state that our company has adhere[d] to all the requirement and regulation of the labour law in Malaysia, which governs various aspects of employment, including working hours, minimum wage, and other related matters."

> "About time": Cyclists react to Shimano crank recall after more than 4,500 incidents

A Halfords spokesperson said the company has a “very strict ethical sourcing code which all our direct suppliers must adhere to,” adding that it was investigating whether any components produced by Kwang Li Industry are used in Halfords’ bikes.