Nike Breaks Off Talks With U. of Michigan on Multimillion-Dollar Apparel Deal By WELCH SUGGS
Nike Inc. unleashed a full-court press against the Worker Rights Consortium last week, and athletics departments across the country may find themselves on the defensive. The shoe and apparel giant broke off talks Thursday on renewing a sports-equipment contract with the University of Michigan -- a member of the anti-sweatshop consortium -- that might have been the most lucrative ever for a college. Universities in the consortium also appeared to be taking steps on Friday to make corporations like Nike more comfortable with the group.
Nike has had a contract to provide Michigan with sporting goods, advertising, and other benefits for the past six years. The new deal would have been worth $22-million to $26-million to the university, according to Nike officials.
Last fall, Michigan agreed to become a conditional member of the consortium, which is made up of students, labor leaders, and university administrators who are calling for higher standards of living for overseas workers who produce goods for Nike and other apparel manufacturers. Nike officials said that Michigan had made unreasonable demands on the company, seeking concessions that went far beyond typical university contracts.
Michigan officials said that Nike's move had taken them by surprise, but that the university would not back down on its commitment to human-rights issues. "I understand where Nike's coming from, but no manufacturer is going to affect the social policies of this university," said William C. Martin, Michigan's interim athletics director. "Social change takes place at universities across the country. I think sometimes kids do a better job of understanding these things than adults do, and I'm proud of them. But it's one hell of an expensive stand."
It was the third time in a month -- and the second in a week -- that Nike or its chairman had taken action against institutions that belong to the consortium. In March, the company broke its contract to supply hockey equipment to Brown University after the university asked to renegotiate its contract to include human-rights provisions.
And last Monday, Nike's chairman, Phil Knight, said he would give no more money to his alma mater, the University of Oregon, because of its membership in the organization.
Both the university and Nike had drafted proposals for a far-reaching new contract, said Marvin Krislov, Michigan's general counsel, and exchanged them with the understanding that they would work out differences at the negotiating table. One of those differences was that Michigan wanted Nike to adhere to its labor-standards policy, which the university has been developing in conjunction with groups like the W.R.C. and the Fair Labor Association.
"The idea was that, at some point, we would sit together and work this out in negotiations," said Mr. Krislov. "That was our understanding of how the process works, it's the normal way, and we're very disappointed."
Nike released a statement Thursday night accusing Michigan of making "substantive modifications" to the agreement at the last minute and of wanting the company to agree to "open-ended and potentially disruptive policies that the university may arbitrarily adopt during the term of the agreement."
The changes, said Vada O. Manager, Nike's director of global issues management, could have cost Nike much more money than the company had anticipated.
Mr. Krislov declined to discuss contract specifics, but he disputed both charges, saying that the university had kept Nike apprised of its plans throughout the process. Michigan published a news release of its own Thursday night, castigating Nike for striking out at "universities committed to finding appropriate ways to safeguard and respect human rights."
The loss of the Nike contract is a huge blow to Michigan athletics. The current deal has paid the department more than $1-million per year, not just in equipment but also in advertising and other sponsorships. Nike's statement said the new contract would have been the richest in college sports.
Nike is the undisputed leader in apparel sponsorships among colleges. The company says it has equipment agreements with well over 100 institutions, and some of its most prominent members belong to the Worker Rights Consortium. Among them: Georgetown University and the University of North Carolina at Chapel Hill.
Playing hardball with Michigan also could drive down the price of sponsorships for other universities. The University of Wisconsin at Madison, a W.R.C. member, has an apparel contract with Reebok International that expires next year, and Hugh V. (Pat) Richter, Wisconsin's athletics director, said he doesn't expect Reebok to renew it, because of current market conditions.
If Nike will not negotiate with the Badgers because of the university's membership in the W.R.C., then it leaves Wisconsin with fewer options, and thus decreases its leverage in the marketplace.
"Michigan has a very successful program, and if some of the issues that caused Nike to pull out had to do with the W.R.C., then it has nothing to do with how successful the program is," said Mr. Richter. "I'm not so sure what would distinguish Wisconsin from [Michigan's situation]."
Mr. Manager of Nike said that his company would handle its sponsorship deals with universities on a case-by-case basis, and would not reject any institution simply for belonging to the W.R.C.
One of the consortium's board members, Peter Romer-Friedman, is a junior at Michigan. He said that he applauded the university's stance and that the university's president, Lee C. Bollinger, and Mr. Martin had "defended the university's integrity" against a show of corporate pressure.
"It's unfortunate that Nike does not want to engage in a healthy, constructive dialogue with universities, students, and human-rights organizations to improve working conditions throughout the world," said Mr. Romer-Friedman, a history and social-sciences major. "As far as the anti-sweatshop campaign goes, the goal is not to get Nike off of our campuses. Nike is one of hundreds of companies that produce licensed apparel.
"The point is to engage companies in debate and improve working conditions for the thousands of workers who produce collegiate apparel."
Nike has raised questions about the consortium's plan for surprise factory checks, but the company's broadest concern is that the W.R.C. does not have any places on its governing board for apparel manufacturers. Instead, the board is composed of students, university administrators, and human-rights activists, Mr. Romer-Friedman said.
However, at a W.R.C. meeting in Park Ridge, Ill., on Friday, representatives of universities said the group should begin talking to apparel producers like Nike. "If the W.R.C. is going to achieve the goals of improving working conditions, there has to be a dialogue with industry," said Lawrence R. Mann, associate chancellor of the University of Illinois at Urbana-Champaign, which belongs to the consortium. Mr. Mann insisted that university members were not bowing to industry pressure, noting they had raised the issue of engaging industry at a W.R.C. meeting on April 7, before Nike began pulling contracts and gifts from universities. He added that the college representatives were not suggesting that apparel producers become active members of the W.R.C. board, a notion that has been strongly opposed by student members of the group.
For its part, Michigan is taking steps to help its athletics department survive the loss of the sponsorship. Even before it was announced, Mr. Martin, the athletics director, had said that the department would have a deficit of $2.5-million to $3-million for this fiscal year, on a total budget of $48-million. On Friday afternoon, Mr. Bollinger authorized a transfer of $3-million in unallocated university funds to bail out the department.
And Mr. Martin said that he expected to make a new deal with an equipment sponsor soon.
"What I've been telling people is that there's only one University of Michigan, but there are a lot of shoe companies," he said, adding that other manufacturers had already started calling. "We will continue, and we will thrive, and our academic programs will not be put at risk."
Scott Carlson contributed to this report.