Vietnam is emerging as a preferred destination for companies looking to resettle production because of tariff concerns emerged from the US – China trade friction.
Footwear maker Brooks Running, a unit of Warren Buffet’s Berkshire Hathaway, is expected to move a major part of its manufacturing operation from China to Vietnam as uncertainties surrounding the US – China trade friction are growing, Reuters reported.
In an interview with Reuters, CEO of Brooks Running Jim Weber said the decision was made in January, when US President Donald Trump was threatening to raise tariffs on the shoes to 45% from 20%.
Weber said the tariff threat weighed “massively” because Brooks cannot simply raise prices on its shoes, which typically retail for US$100 to US$160 a pair, and though trade tensions have cooled, the company could not wait for a resolution.
The CEO said Brooks would pull most of its production out of China, which is considered a long-term decision, adding the company is expected to be in Vietnam by the end of the year.
About 8,000 jobs will also move to Vietnam from China, Weber added.
Vietnam is emerging as a preferred destination for companies looking to relocate production because of tariff concerns.
The country generates about 55% of Brooks’ running shoe production, with China accounting for the remainder.
Brooks shoes are sold in 56 countries, and account for the bulk of the Seattle-based company’s annual revenue, which grew 26% last year to US$644 million.
Revenue from January to April is up 22 percent in 2019, and Weber is targeting full-year revenue of just under US$750 million. He hopes revenue will reach US$1 billion by 2021. Brooks also sells apparel.
Weber said Brooks may start shoe production in a third, yet-to-be-determined country next year. The eventual breakdown could be 65% from Vietnam, 10% from China and 25% from the third country, he said.
Brooks plans to continue research and development, as well as small production runs of shoes, in China.
Brooks became part of Berkshire in 2006 when Berkshire’s Fruit of the Loom unit bought its parent at the time, Russell Corp. Berkshire spun out Brooks as a standalone unit in 2012.
Weber began reporting last year to Berkshire Vice Chairman Greg Abel, after previously reporting to Buffett. Hanoitimes