* Death toll rises to 160, could go much higher
* Cracks found in building day before collapse - police, industry official
* Canada's Loblaw says one factory supplied it with garments
By Serajul Quadir and Ruma Paul
DHAKA, April 25 (Reuters) - The death toll from a building collapse in Bangladesh has risen to 160 and could climb higher, police said on Thursday, with people trapped under the rubble of a complex that housed garment factories supplying retailers in Europe and North America.
The collapse, the third catastrophic incident at Bangladeshi factories in five months that have killed more than 200 people, could taint Bangladesh's reputation as a source of low-cost products and services and call attention to Western retailers and other companies that obtain products from the country.
Frantic rescue workers were digging through the rubble of the eight-storey Rana Plaza building in Savar, 30 km (20 miles) outside the Bangladeshi capital Dhaka, which collapsed on Wednesday. More than 1,000 people were injured.
"The death toll could go up as many are still trapped under the rubble," Dhaka's district police chief, Habibur Rahman, told Reuters on Thursday.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) president Mohammad Atiqul Islam said there were 3,122 workers in the factories on Wednesday. He said there had been indications from Savar officials that cracks had been found in the building the day before.
"We asked the garment owners to keep it closed," Islam said.
Rana Plaza's owner had told proprietors of the building's five garment factories that the cracks were not dangerous, Islam added. "After getting the green signal from the plaza owner all the garment factories opened," he said.
However, police official Mohammad Asaduzzaman said factory owners appeared to have ignored a warning not to allow their workers into the building after a crack was detected on Tuesday.
News reports beamed around the world showed young women workers, some apparently semi-conscious, being pulled out of the rubble by firefighters and troops. Doctors at Dhaka hospitals said they couldn't cope with the number of victims.
"I was at work on the third floor, and then suddenly I heard a deafening sound, but couldn't understand what was happening. I ran and was hit by something on my head," said factory worker Zohra Begum.
BUILDING FIRES, COLLAPSE
The Rana Plaza building collapse follows a November fire at the Tazreen Fashion factory on the outskirts of Dhaka that killed 112 people, and it has compounded concerns about worker safety and low wages in Bangladesh.
Soon after the collapse, Canada's Loblaw came forward to confirm a connection with the building. It said one factory made a small number of "Joe Fresh" apparel items for the company.
"We are extremely saddened to learn of the collapse of a building complex in Bangladesh and our condolences go out to those affected by this tragedy," Julija Hunter, public relations vice-president for Loblaw Companies, said in an email.
"We will be working with our vendor to understand how we may be able to assist them during this time," Hunter said.
Loblaw Companies Ltd makes Joe Fresh clothing as well as President's Choice supermarket packaged food. Its parent is food processing and distribution firm George Weston Ltd, according to Reuters data.
Loblaw said it set vendor standards to ensure that products are made "in a socially responsible way" and conducts regular audits. Those standards include prohibiting child harassment and abuse or forced labour, and ensuring fair pay and benefits.
Bangladesh employs about 3.6 million people in the garment industry and is the world's second-largest apparel exporter.
Following the Tazreen fire, giant U.S. retailer Wal-Mart Stores Inc. said it would take steps to alleviate safety concerns, while Gap Inc. announced a four-step fire-safety programme.
"Still we are struggling to overcome the odds after the Tazreen fire, now another incident which is a strong blow for the sector," BGMEA's Islam said.
However, Edward Hertzman, a sourcing agent based in New York who also publishes trade magazine Sourcing Journal, said pressure from U.S. retailers to keep a lid on costs continues to foster unsafe conditions.
Hertzman, whose trade publication has offices in Bangladesh, said New Wave Bottoms Ltd occupied the second floor, Phantom Apparels Ltd the third, Phantom Tack Ltd the fourth and Ethar Textile Ltd the fifth.
The New Wave website listed 27 main buyers, including firms from Britain, Denmark, France, Germany, Spain, Ireland, Canada and the United States.