Is Slavery Still Part of America’s Automotive Steel Supply Chain?

This week Greenpeace has been amplifying the public relations volume against General Motors, Ford, BMW, Nissan, and other U.S. based automakers in a repeat of allegations that Brazilian slave labor is tainting their respective steel product supply chains.

Allegations also are that illegal logging and related fraud continue largely unabated in Brazil despite automakers having previously acknowledged said issues, and having shown themselves to have taken steps to remove slave-supplied labor from any tier of their raw materials supply.

Specifically, certain Brazilian pig iron suppliers are said to have not changed their ways in using forced labor in the processing of the this material needed to make steel for which the U.S. is the largest consumer, and automakers wind up using in manufactured vehicles.

As mentioned, this is not a new allegation, just a continuation, according to an extensive investigative report by Greenpeace.

And aside from the environmental watchdog’s witness, the Brazilian government has acknowledged slavery within its borders, has conducted police raids to free forced laborers from back-country camps; humanitarian organizations have also documented slavery, the U.S. Department of Labor and the United Nations ILO likewise know it exists.

In November 2006, Bloomberg blew the cover right off in a lengthy expose saying thousands work in Brazil as slaves. At the time automakers conceded the use of slaves in the processing of charcoal for rural blast furnaces, and quickly took steps to separate themselves from tainted pig iron supplies.

But because the problem continues, with authorities saying people are being forced to work under threat of violence or death, Greenpeace documented the problem in a recent 17-page pdf, Driving Destruction in the Amazon replete with 141 end-noted sources; the product of two years’ work.

“Research involved satellite analysis, flyovers, analysis of import records, trade data, extensive interviews,” said Daniel Brindis, forest campaigner for Greenpeace USA. “The U.S. car companies involved were first made aware of this problem at least six years ago but have still failed to address the problem in any substantial way.”

We first learned of the Greenpeace action a couple of days ago when we received an intriguing email from one of the activists down in Brazil from San Francisco blogging on location.

“Greetings from the Amazon. I am currently on board the Rainbow Warrior here in the port city of Sao Luis, and I have something that I think might be relevant to Hybridcars.com,” said James Turner. “We’re currently entering the second day of a blockade of a cargo ship which is destined for the USA, delivering ‘pig iron’ to New Orleans. I didn’t know what pig iron was so I don’t blame you if you don’t either.”

Since then, we’ve researched what we could about a situation for which Greenpeace says it feels compelled to stage a sit-in, in which human protesters are now tied to a U.S. –bound pig iron export ship owned by Clipper Group Limited from Denmark.

We are awaiting further reply from some human rights groups on the ground who confirmed the slave/charcoal/pig iron problem, and who are actively fighting it as well, but are releasing what we have so far from three American companies central to the story.

One response came from Severtsal, a Russian-owned, U.S.-located steel company. This manufacturer, Greenpeace said, is one major entity receiving among its raw materials slave- and fraud-tainted pig iron. Last October it named major North American-based automakers as its customers.

“Severstal Columbus is currently supplying rolled steel to Ford Motor Co., BMW, Mercedes, Nissan and General Motors, according to Greg Goad, Severstal Columbus general manager of commercial,” wrote The Dispatch local newspaper.

Yesterday, Katya Pruett, Director, Public Relations and Communications, Severstal North America replied with the following statement:

As a socially responsible company, Severstal is concerned by the Greenpeace study. We operate in compliance with environmental and labor laws and regulations and expect the same from our suppliers. Pig iron is a global commodity that Severstal purchases on the open market, like many others, through third party traders. We will look into the situation and will be following up to ensure our high standards are met across the entire supply chain.

The company further made clear it has not acknowledged receiving slavery tainted products and reiterated it is looking into it.

In response, Greenpeace’s Brindis said U.S. customs documentation adds to the local paper, which itself ought to be viewed as reliable:

The report states that the Severstal mill in Mississippi supplies the automakers. We have reason to believe that Severstal’s own statements are correct. U.S. customs import data shows this mill in Mississippi buying from Viena, the same year Viena was sourcing charcoal from Chapadao, a charcoal camp using slave labor. Unless these companies have assurances that the steel they buy from this mill is not made with pig iron from Viena or Sidepar, the connection is there. The Severstal mill is only an example a pathway into the automakers’ supply chain. If any of their cast iron or steel suppliers are buying from this region there is a strong possibility that its source is tainted.

We also asked General Motors Environment, Energy & Safety Communications spokesperson, Sharon K. Basel this week, and GM too had heard of Greenpeace’s pdf, and had ready a prepared statement:

GM STATEMENT IN RESPONSE TO GREENPEACE REPORT “DRIVING DESTRUCTION IN THE AMAZON”

General Motors has a strict “zero tolerance” policy against the use of child labor, abusive treatment of employees or corrupt business practice in the supply of goods and services to us. These and other prohibited activities are addressed as part of our purchase contract terms and conditions*.

Additionally, we support the Global Sullivan Principles, which are aspirational guidelines for responsible business conduct, including the treatment of workers and the role of companies on strengthening the local communities in which they work. The Global Sullivan Principles were developed by the late Rev. Leon Sullivan, a retired member of the General Motors Corporation Board of Directors, at the urging of Kofi Annan, former Secretary General of the United Nations. Furthermore, we encourage our suppliers (and their suppliers) to support the Global Sullivan Principles or similar guidelines, such as the European Principles of Social Responsibility and the European Employee Forum.

She followed up also saying a third party organization which vets suppliers had the following updates:

To date, more than 1,534 Tier 1 automotive companies have completed the AIAG-led training for global working conditions in Mexico, China, Turkey, Brazil and India. In Brazil alone, 240 GM supplier sites have participated in this training. More importantly, the information has been cascaded to an additional 58,298 Tier 2 suppliers and has affected 261,462 workers.

To date, GM has not explicitly admitted receiving tainted supplies. In its report in 2006, Bloomberg noted GM did implicitly appear to acknowledge that slave labor may have been in its supply chain when on October 12 that year it cut supply ties after not getting an answer fast enough from a supplier when questioned on the subject.

“Intermet didn’t act like they had a sense of urgency,” said Bo Andersson, GM’s vice president of global procurement and supply to Bloomberg at the time. Up until then, Intermet annually supplied GM with about $3.2 million of engine and transmission components and sold other parts to GM’s suppliers, said GM spokeswoman Linda McGill to Bloomberg in 2006.

However this action by GM was reportedly reversed on Oct. 19, 2006 when GM reinstated Intermet as a supplier after concluding the company provided sufficient documentation that its supply chain was free of forced labor, Bloomberg reported GM spokeswoman Deborah Silverman as saying.

And more explicit was a forthright response yesterday on the subject from Todd Nissen, Ford Corporate Communications, who answered our questions about Greenpeace’s latest allegations, saying essentially it was handled back in 2006:

We are very familiar with the pig iron situation in Brazil. We were first made aware in 2006 that charcoal produced there with the use of slave labor was in our supply chain. We immediately stopped sourcing from the site identified in the 2006 investigation and took steps to work with our supply chain to safeguard human rights throughout their operations. Last year, we renewed our inquiry into the potential points of entry for Brazilian pig iron in our supply chain and are evaluating supplier progress to ensure responsible procurement of the material.

A few other points [from Ford]:

· We expect our suppliers to fully comply with local laws and our Code of Basic Working Conditions, and we verify that compliance with third-party audits.

· Since 2006, Ford has provided training on Working Conditions in Brazil to 335 suppliers with the mandate that each of these suppliers cascade clear expectations for responsible working conditions and compliance with Brazilian labor laws to their suppliers. This training was expanded to sub-tier suppliers beginning in November 2011.

· We also are working with the U.S. State Department, the International Labor Organization and the governing committee of the Brazilian National Pact to Eradicate Forced Labor to seek multilateral solutions that will help to validate information and improve transparency.

Ultimately, we hope to enable responsible purchasing decisions throughout the supply chain.

I also encourage you to visit our 2011 Sustainability Report, where we provided a case study of the pig iron situation. This also details how we conduct regular audits of tier one supplier sites to monitor compliance with our expectations and legal requirements.

In its pdf, Greenpeace wrote “most brands, like BMW and Toyota, have not gone on record about the issue,” but said it is aware of GM and Ford’s responsiveness, and more recently, the Guardian UK also got a response from BMW.

“A BMW spokesman said the company ensured suppliers ‘meet the same environmental and social standards we have set ourselves when they become our business partners’ but ensuring sub-suppliers did so was a challenge,” wrote The Guardian yesterday.

To us, Brindis said Greenpeace has heard corporate statements disavowing products tainted with human trafficking before:

I am aware that these companies claim a zero tolerance for forced labor in their supply chain, the findings of our research show that there needs to be more engagement on their part because it is not enough. As these companies are buying from this region, albeit indirectly, it is a region of high risk for this type of problem and these companies should require their suppliers to be more vigilant in avoiding purchases tainted with slave labor or fraud, or do more than wait for government enforcement when the record shows that the government’s commitment to prevent slave labor is lacking.

It is important to note that the primary focus of our report is the deforestation aspect and not a single one of these companies have issued statements about how they plan to address the deforestation problem endemic in pig iron production.

In its pdf, Greenpeace issued the following demands:

Automakers, construction firms and other heavy users of steel:

1. Identify whether your suppliers use pig iron processed with charcoal and demand that those
suppliers, both direct and indirect, put in place verifiable, monitorable and reportable means of
demonstrating their supply chain is free of forest destruction and slavery.

2. Require eucalyptus plantations that fuel pig iron production in your supply chain to have adequate environmental and social safeguards, including but not limited to a zero deforestation policy, and free, prior and informed consent of local communities.

Brindis said Greenpeace also is working up against a deadline for a possible change in the Brazil forest code:

A powerful lobby of ‘ruralists’ – agribusiness interests – have put enormous pressure on the congress to change this decades old law, but the President [Dilma Vana Rousseff] still has the chance to veto it, in entirety or via line item veto. Her deadline for a decision is May 25. As in many modern democracies the spending power of this lobby outweighs the views of scientists, attorneys, faith groups, labor unions, environmentalists and public opinion. Polling shows a high level of support for keeping this law intact, but the matter is now in the president’s hands.

Some Additional Background

The scope of this story is too broad to detail much further in a single article, but for those interested, we’ve linked enough source materials to research further.

While Greenpeace says it has sufficiently documented the case, still in contention is whether carmakers will again admit to receiving steel tainted by slavery and other illegalities, but at least certain is slavery as a problem persists.

Brazil was the last country to make slavery illegal in 1888. It has been the subject of televised documentaries, reports, an article in 2009 by CNN, eye witnesses who say the problem persists to this day, and more.

Para Estate charcoal camps.

One way people are lured into modern slavery in Brazil is by promising the poor and uneducated to leave their homes for jobs. When they get to a work site often in the middle of nowhere, reports have been that they are told they owe a massive debt, and must work to repay it. Threats and fear of being tracked down keep them in line.

This form of slavery called “debt bondage” is recognized by the UN, and noted by the U.S. Department of Labor.

The Brazilian federal police have raided work camps to free forced laborers, and have ongoing efforts but say it is difficult policing hard-to-reach areas.

There is a NGO private sector agreement and recognition of it, The Pact to Eradicate Slavery.

With regards to pig iron production – one of the more arduous of several jobs in which slaves are used – Brazil is a relative anomaly among the world’s producers by using hard wood charcoal as a heat source for blast furnaces.

Having the Amazon trees at hand is a quick and dirty means of fuel for heating the furnaces, and as Brindis mentioned, illegal deforestation is allegedly commonplace.

Other alleged crimes include loggers driving into lands preserved for indigenous people and even at times threatening violence and homicide if protests are made as trees are felled and hauled off.

Crimes beyond that include several specific allegations of fraudulent practices routinely used to evade insufficiently upheld laws intended to regulate deforestation, as Brindis said:

Our report explains a variety of ways that charcoal suppliers evade laws and set up temporary entities to launder rainforest charcoal. The fact that the fraud continues and hasn’t been addressed is a failure of the market and the government. We are talking about the movement of millions of cubic yards of wood charcoal moving around the region, almost all of which going into pig iron foundries. The market is aware of the high incidence of fraud and the illicit origins of materials. Continuing to do business in the region without taking further protective measures that actually make a difference borders on negligence.

In the meantime, we have it on record that Ford does explicitly acknowledge slavery tainted its supply chains – in GM’s case it took action while it had reason to doubt, and showed itself willing to sever supply ties in the not-too-distant past.

They and Severstal have further said they have policies in place against using illegally sourced materials leading them to re-investigate to one degree or another the latest allegations.

We shall see where things go, but for now, one ship in Sao Luis is not going anywhere while Greenpeace activists hang in 24-hour shifts from its anchor chain attempting to focus attention on a problem for which they say too many are too ready to wash their hands, or look at but not see.


  • AP

    Is this article here for filler?

    What does it have to do with hybrids/fuel economy?

  • Jeff Cobb

    No it is not. It is within the broad scope of the site’s overall mission given that hybrids – and all “eco” cars – are automobiles too, and their manufacture may have interest to readers.

    Further, readers who are interested in fuel economy and greenhouse gas emissions often have interest in other “sustainability” issues as they can tend to overlap, and address similar or same broader problems. Illegal or unethical deforestation of the Amazon alleged for the service of the auto industry would usually fit within that spectrum.

    Further, given that allegations and much evidence exists showing grave human rights violations do exist in a variety of forms, it also generally raises awareness with regard to the auto industry.

    Actually, steel is used by other companies, but I kept this on target within the auto industry.

    This problem has already been documented in the past six years, and at least Ford has said it knows there was a problem, but thinks it has it under control.

    “We are very familiar with the pig iron situation in Brazil. We were first made aware in 2006 that charcoal produced there with the use of slave labor was in our supply chain,” Ford said yesterday about previous incidents.

    Today the main question is whether problems persist as alleged. It has been said that suppressing and/or whitewashing of issues has been part of the problem. So this article also is a service to all people of good conscience everywhere.

    Thanks for reading, AP.

    Regards,

    Jeff

  • shecky vegas

    On Wall Street, it’s not called Slavery. It’s called being Monetarily-Challenged.

  • Benjamin

    It sounds like GM and Ford are taking this seriously but after following some of your links I don’t know. Sounds like they still have a real problem in Brazil, and lots of people lie about their practices so they can still do business – rampant corruption.

    American companies have billions on the line. They may even want to avoid having slaves or near-slaves doing dirty work to help make their products, but it does not sound like that is possible the way things are now.

    My gut says Greenpeace may have a case.