Wal-Mart Locks in China
Locks Out American Workers
June 2007
According to a June 2007 report by the Economic Policy Institute (EPI), Wal-Mart’s relentless push to move production to China destroys approximately 61,000 U.S. jobs every year. 5 Speeding the loss of U.S. jobs to China is Wal-Mart’s recent expansion — 916 additional stores between 2001 and 2006.6 Each new store Wal-Mart added in these years represented 336 U.S. jobs lost to China. Sam Walton believed that Wal-Mart could help “restore [U.S.] manufacturing capacity, improve our national economy and renew our pride in American craftsmanship.” 8
EPI reports that Wal-Mart’s imports from China eliminated nearly 308,000 U.S. jobs between 2001 and 2006 — that’s roughly equal to the total civilian workforce of....
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El Paso, Texas
al-Mart’s demands forced 14 suppliers — including Hasbro, Fruit of the Loom, and Procter & Gamble — to cut approximately 17,000 U.S. manufacturing jobs between 2001 and 2006.1 Thousands of these jobs were shipped to China.
Syracuse, New York
324,700 291,900 287,300 260,500 249,400 7
But Wal-Mart claims its not an American company anymore: “We’re a global company and it is necessary to source globally to ensure that we meet the needs and wants of our customers,” says WalMart spokesman David Tovar.9 When Wal-Mart CEO Lee Scott took over Wal-Mart’s U.S. merchandising in 1995, 94 percent of Wal-Mart’s goods were made in the United States.4 Today, China is the source for more than 70 percent of Wal-Mart’s U.S. merchandise.2
Des Moines-West Des Moines, Iowa 304,900 Stockton, California Durham, North Carolina Lansing-East Lansing, Michigan
But at Wal-Mart’s stores in China, Canada, Mexico and England the story is very different. Wal-Mart buys 99% of the goods sold in its Chinese stores in China.10 Wal-Mart buys 80% of all the goods sold in its Canadian stores in Canada.11 Wal-Mart buys 93% of the merchandise sold in its Mexican stores from suppliers based in Mexico.12 In the U.K., Wal-Mart/Asda recently announced a major “campaign to boost the beleaguered British clothing industry,” by “stocking an entire range of clothing made exclusively in the U.K.”13 “If we’re asking, ‘Who’s to blame for global outsourcing?’ we shouldn’t be looking at the countries that are exporting to the United States,” says Duke University’s Gary Gereffi. “We should be looking at the U.S. firms that are going offshore and offsourcing products. And the biggest U.S. company that supplies goods offshore is Wal-Mart… Wal-Mart is one of the major companies that’s been promoting a global race to the bottom. It’s like we’re on a bus with an accelerator pedal with no brakes.”14
“ Wal-Mart is one of the major companies that’s been promoting a global race to the bottom. It’s like we’re on a bus with an accelerator pedal with no brakes.”
— Professor Gary Gereffi, Duke University,
PBS Frontline
Wal-Mart Locks in China, Locks Out American Workers
The following examples of Wal-Mart suppliers “ I think Wal-Mart sucks. forced to send U.S. jobs to China are unusual because “the people who do business with Wal-Mart Excuse me, that’s not a won’t talk about how Wal-Mart does what it does,” very nice word.” 16 writes Charles Fishman, in his bestseller, The WalMart Effect.15 As one businessman with decades — Anonymous Wal-Mart Supplier of experience servicing Wal-Mart said, “If I say something Wal-Mart doesn’t like, [and my company loses] Wal-Mart as a customer, who the hell do you get to replace them? What would I have said about Wal-Mart? I think Wal-Mart sucks. Excuse me, that’s not a very nice word.”16
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Wal-Mart Locks in China, Locks Out American Workers
Russell Corporation
In 2005, Wal-Mart, Russell’s largest customer, announced that it would stop purchasing boys’ basic fleece from the manufacturer. This resulted in a $30 to $40 million loss in sales for Russell.18 Within months, Russell began to close U.S. plants, eliminating nearly 1,700 American jobs. To meet Wal-Mart’s asking price for other merchandise, Russell shipped about 1,200 of these jobs overseas.19 Russell CEO Jack Ward laid the blame at Wal-Mart’s door: “With our net profits only two percent of sales, these changes are vital to the future of Russell… We continue to face increased global competition and pricing pressure from customers such as Wal-Mart.”20
Hasbro, Inc.
In 1995, the year Lee Scott took over merchandise operations for WalMart, Hasbro employed 7,000 U.S. workers and Wal-Mart accounted for just 12% of its sales.21 By 2006, Hasbro’s reliance on Wal-Mart doubled to 24%.22 Today, Wal-Mart is Hasbro’s largest customer, and accounts for $1 out of every $4 Hasbro makes. As a result, Hasbro employs fewer than half the number of U.S. workers it did in 1995.23 To keep pace with Wal-Mart’s relentless price demands, Hasbro says it now sources “production of substantially all of our toy products and certain of our game products through unrelated manufacturers in various Far East countries, principally China.”24
As Wal-Mart Sales Increase, Hasbro Cuts U.S. Workforce*
8000 7000 30%
5000 4000 3000 2000 1000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
20%
15%
10%
0%
Fiscal Year
U.S. Employees WMT Exposure
*Form 10-K, Fiscal Years 1995 to 006, Hasbro Website (accessed June 18, 007); available from http://phx.corporate-ir.net/phoenix.zhtml?c=689&p=irol-sec
Wal-Mart Locks in China, Locks Out American Workers
Percentage of Sales Through Wal-Mart
6000
25%
U.S. Employees
L.R. Nelson
In 2005, the L.R. Nelson sprinkler company, which had manufactured lawn sprinklers in Peoria, Illinois since 1911, laid off almost all of its factory workers and transferred the bulk of its operations to China.25 Nelson CEO Dave Eglinton blamed the layoffs and the relocation of jobs to China squarely on Wal-Mart. “Wal-Mart said they would love to buy from us… but the cost differential is so great that they told us unless we supply them out of China, we couldn’t do business.”26 Before L.R. Nelson moved production to China, one laid-off worker told a reporter, Chinese managers were “walking around the plant and videotaping us working. That was horrible, horrendous. Right in our faces. They are taking our jobs.”27
The Hoover Company
Hoover Company, the 100 year-old Ohio-based vacuum manufacturer, has cut as many as 3,651 jobs since 2001 to meet Wal-Mart’s “China Price.” 28 Hoover’s parent company, Whirlpool, sold Hoover to Hong Kong-based Techtronics Industries Co. in 2005. In April 2007, Hoover’s new owner closed the Company’s campus in Canton and cut 750 jobs in Ohio. 29
“ Wal-Mart said they would love to buy from us...but the cost differential is so great that they told us unless we supply them out of China, we couldn’t do business.”
— Dave Eglinton, L.R. Nelson CEO
Jim Replace, president of the International Brotherhood of Electrical Workers Local 1985 in Canton, blamed Hoover’s demise on retailers like Wal-Mart for pressuring domestic manufacturers to move production offshore to cheaper areas.30
Kentucky Derby Hosiery Company
Kentucky Derby Hosiery, a sock manufacturer that supplied Wal-Mart for 40 years, closed its sock finishing plant in Hickory, North Carolina in 2006.31 Kentucky Derby’s largest customer, Wal-Mart, accounted for at least 20 percent of its sales in 2002.32
According to Kentucky Derby CEO Bill Nichol “[Wal-Mart’s] message to us, surprisingly, is, ‘There’s a broad market out there.’ If you want to focus on the lowest-cost part of the market, it’s obvious that you can’t do that in the United States… China, practically speaking, is it.”33 Shortly after Kentucky Derby Hosiery was acquired by Canadian-based Gildan Activewear, Gildan cut about 540 North American jobs, including more than 60 workers at the Kentucky Derby Hosiery plant in Carroll County, Virginia.34
Jason Judd is the Director of the Change to Win Wal-Mart Campaign. Sean Rudolph is the Communications Coordinator of the Change to Win Wal-Mart Campaign. Change to Win was founded in September 2005 by seven unions and six million workers to build a movement of working people with the power to make work pay for everyone. The seven affiliated unions are: Service Employees International Union, UNITE HERE, United Food and Commercial Workers International Union, International Brotherhood of Teamsters, Laborers’ International Union of North America, United Brotherhood of Carpenters and Joiners of America and United Farm Workers of America. Chair, Anna Burger Secretary-Treasurer, Edgar Romney
Wal-Mart Locks in China, Locks Out American Workers
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(Endnotes) 1 2 3 4 5 6 7 8 9 10 11 JWT Employment Communications, “Layoff Report,” (accessed June 18, 2007). http://www.jwtec.com/hrlive/layoffs.php. “Wal-Mart Stores 2005 Supplier of the Year,” Wal-Mart Website (accessed June 18, 2007). http://walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=243; “Wal-Mart Announces Suppliers of the Year,” PR Newswire, April 14, 2000. “Is Wal-Mart Good for America? Interview Gary Gereffi,” Frontline, (accessed June 18, 2007). http://www.pbs.org/wgbh/pages/frontline/shows/walmart/interviews/gereffi.html. “Gladstone Capital Quarterly Shareholders Call,” Gladstone Capital, February 10, 2005. 70% figure does not include food products. Rob Scott & Economic Policy Institute, The Wal-Mart Effect: Massive Chinese Imports Eliminated 200,000 U.S. Jobs, 20012006, June 26, 2007. Form 10-K Fiscal Year 2001 to Fiscal Year 2006, Wal-Mart Website (accessed June 18, 2007). http://investor.walmartstores. com/phoenix.zhtml?c=112761&p=irol-sec. Bureau of Labor Statistics, “Table 1. Civilian labor force and unemployment by state and metropolitan area: April 2007,” (accessed June 18, 2007). http://www.bls.gov/news.release/metro.t01.htm. Sam Walton, “Wal-Mart Company Memorandum,” March 14, 1985 (accessed June 18, 2007). http://www.wakeupwalmart. com/downloads/sam-imports.pdf. Marcus Kabel, “Union Group Attacks Wal-Mart Over Goods Made in China,” Chicago Tribune, May 31, 2007 (accessed June 18, 2007). http://www.chicagotribune.com/business/chi-070531walmart-china,0,3896584.story?coll=chi-bizfront-hed.
CLSA Asia-Pacific Markets, “CLSA’s China Reality Research,” May 30, 2007. Doug Burn, “Working with Wal-Mart,” Food in Canada: The Voice of the Canadian Food and Beverage Industry, July/August 2005 (accessed June 18, 2007). http://www.bizlink.com/foodfiles/PDFs/july2005/food_retail_spotlight_july_05.pdf.
“Informe de Responsabilidad Social Y Sustentabilidad 2006,” Wal-Mart de Mexico Website (accessed June 18, 2007). http:// www.walmartmexico.com.mx/files/2006rsSP.pdf. Asda press release, “Asda Launches New ‘Made in UK’ George Clothing Range,” Asda Website (accessed June 18, 2007); available from http://www.asda-press.co.uk/pressrelease/99. “Is Wal-Mart Good for America? Interview Gary Gereffi,” Frontline, (accessed June 18, 2007). http://www.pbs.org/wgbh/pages/frontline/shows/walmart/interviews/gereffi.html. Charles Fishman, The Wal-Mart Effect, (The Penguin Press, 2006) 86. Ibid., 88. JWT Employment Communications, “Layoff Report,” (accessed June 18, 2007). http://www.jwtec.com/hrlive/layoffs.php; “Wal-Mart Stores 2005 Supplier of the Year,” Wal-Mart Website (accessed June 18, 2007). http://walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=243. Jack Ward, Russell Corp. CEO, “Russell Corporation Investor Conference Call,” Final Fair Disclosure Wire, January 20, 2006. Jay Reeves, “Russell to Cut 2,300 Jobs by Late 2007,” The Associated Press, January 20, 2006. Russell Hubbard, “Russell cuts 550 Alabama Jobs, More to Come,” Birmingham News (Alabama), January 21, 2006. Form 10-K, Fiscal Year Ending December 25, 1994. Hasbro Website (accessed June 18, 2007). http://phx.corporate-ir.net/ phoenix.zhtml?c=68329&p=irol-sec. Form 10-K, Fiscal Year Ending December 31, 2006, Hasbro Website (accessed June 18, 2007). http://phx.corporate-ir.net/ phoenix.zhtml?c=68329&p=irol-sec. Ibid. Form 10-K, Fiscal Year Ending December 28, 2003. Hasbro Website (accessed June 18, 2007). http://phx.corporate-ir.net/ phoenix.zhtml?c=68329&p=irol-sec. Charles Fishman, The Wal-Mart Effect, (The Penguin Press, 2006) 249. Steve Tarter, “L.R. Nelson Cuts 80 Jobs: Company Shifts Production of Sprinklers to China,” Peoria Journal Star, May 24, 2005. Charles Fishman, The Wal-Mart Effect, (The Penguin Press, 2006) 255. Michael Arndt, “Sucking the Life Out of Hoover,” BusinessWeek, August 25, 2005 (accessed June 18, 2007). http://www. businessweek.com/magazine/content/05_34/b3948477.htm; JWT Employment Communications, “Layoff Report,” (accessed June 18, 2007). http://www.jwtec.com/hrlive/layoffs.php. M.R. Kropko, “New Owner Announces Closings, Job Cuts at Hoover’s Home Base,” The Associated Press, April 2, 2007. Thomas W. Gerdel, “Maytag Corp. Weighs Selling Hoover Unit ‘We Can No Longer Carry the Burden,’ Parent Company’s Chairman Says,” Plain Dealer (Cleveland), February 4, 2006. “Hickory Sock Manufacturer to Close Plant,” Charlotte Business Journal (North Carolina), June 8, 2006. James Sebenius & Ellen Knebel, “William Nichol, Jr. and Kentucky Derby Hosiery: Negotiating with Wal-Mart (A),” Harvard Business School Publishing, November 7, 2006. “Is Wal-Mart Good for America? Transcript” Frontline, (accessed June 18, 2007); available from http://www.pbs.org/wgbh/ pages/frontline/shows/walmart/etc/script.html. “Gildan to Close Plants, Jobs Cuts,” The Associated Press, September 27, 2006.
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Wal-Mart Locks in China, Locks Out American Workers