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					Wal-Mart Locks in China

 Locks Out American
          June 2007
                               al-Mart’s demands forced 14 suppliers — including Hasbro, Fruit of the
                               Loom, and Procter & Gamble — to cut approximately 17,000 U.S. manu-
                               facturing jobs between 2001 and 2006.1 Thousands of these jobs were
                               shipped to China.
                                 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
                                                                              But Wal-Mart claims its not
              EPI reports that Wal-Mart’s imports from China              an American company anymore:
              eliminated nearly 308,000 U.S. jobs between 2001            “We’re a global company and it
              and 2006 — that’s roughly equal to the total civilian       is necessary to source globally to
              workforce of....                                            ensure that we meet the needs and
                                                                          wants of our customers,” says Wal-
              Syracuse, New York                          324,700         Mart spokesman David Tovar.9
              Des Moines-West Des Moines, Iowa 304,900
                                                                             When Wal-Mart CEO Lee Scott
              El Paso, Texas                              291,900         took over Wal-Mart’s U.S. mer-
              Stockton, California                        287,300         chandising in 1995, 94 percent of
                                                                          Wal-Mart’s goods were made in the
              Durham, North Carolina                      260,500
                                                                          United States.4 Today, China is the
              Lansing-East Lansing, Michigan              249,400 7       source for more than 70 percent of
                                                                          Wal-Mart’s U.S. merchandise.2
              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
              In the U.K., Wal-Mart/Asda recently announced a major “campaign to boost the belea-
              guered British clothing industry,” by “stocking an entire range of clothing made exclusive-
              ly in the U.K.”13
               “If we’re asking, ‘Who’s to blame for
           global outsourcing?’ we shouldn’t be looking               “	Wal-Mart	is	one	of	the		
           at the countries that are exporting to the United            major	companies	that’s	
           States,” says Duke University’s Gary Gereffi.
           “We should be looking at the U.S. firms that                 been	promoting	a	global	
           are going offshore and offsourcing products.                 race	to	the	bottom.	It’s	like	
           And the biggest U.S. company that supplies
           goods offshore is Wal-Mart… Wal-Mart is one
                                                                        we’re	on	a	bus	with	an	
           of the major companies that’s been promoting                 accelerator	pedal	with	no	
           a global race to the bottom. It’s like we’re on a            brakes.”
           bus with an accelerator pedal with no brakes.”14
                                                                           —	Professor	Gary	Gereffi,	Duke	University,
                                                                                                         PBS	Frontline

   Wal-Mart Locks in China, Locks Out American Workers
   The following examples of Wal-Mart suppliers
forced to send U.S. jobs to China are unusual be-      “	I	think	Wal-Mart	sucks.	
cause “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,”
writes Charles Fishman, in his bestseller, The Wal-
                                                         very	nice	word.”	16
Mart 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

              otice of Termin

   Wal-Mart N
                            Jobs Cut
                             al-Ma     e
                                   rt 200Year                                 4,000
 Fruit of the Loomup
                             f th
                     plier o
                                 art 20
                  le                       r
  Proctor & Gamb
                         Wal-M of the Yea
                       Supp lier
                                     art 20 Year
  Masterchem   Industries,SInc.lier of the

                             upp                           05
                                                    art 20
                                              Wal-M oy the Yea
                                            omli  an
                                                 per f
                   e Manufacturing C upp

                                 2005 ar
              erby HouWpliyr of the Y
                      siere art
                         al-M          e
   Kentucky D        S p
                                     05                                           1,500
                              art 20 Year
        es Group Inc.Supplier of t
                       Wal-M       he
   Holm                                 05                                        1,100
                                art 20        r
                        Wal-M of the Yea
   American Sugar     Supp lier
                                             05                                    1,000
                                      art 20      r
                             Wal-M of the Yea
   Shaw Industries       Supp    lier
                                                      art 20
                                                                  r                1,000
                                               Wal-M of the Yea
                   Fashions LP
   Springs Window
                                           S upplie

                                                art 20
                                                        05                          700
                    y Inc.
                                         Wal-M of the Yea
   Coleman Compan                     Sup plier
                                              ica                   art 20
                             nics, North Amer
                                                            Wal-M of the Yea

            Consumer Electro
                                                          Su pplier
    Philips                                                                         500
                               art 20       r
                       Wal-M of the Yea
     Hasbro, Inc.   S upplie
                                     art 20
     Tyco Plastics LP
                           Wal-M of the Yea
                        Supp    lier
      Moretz, Inc.
                               art 20    r
                       Wal-M of the Yea
                     Sup plier

                                                        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 in-
           creased 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 Wal-
           Mart, 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                                                                 30%

                                                                                                             Percentage of Sales
                                                                                                              Through Wal-Mart
                 U.S. Employees



                                  3000                                                                 15%


                                    0                                                                  0%
                                         1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

                                                              Fiscal Year
                                                                                                       U.S. Employees
                                                                                                       WMT Exposure

               *Form 10-K, Fiscal Years 1995 to 006, Hasbro Website (accessed June 18, 007); available from

   Wal-Mart Locks in China, Locks Out American Workers
   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, hor-
   rendous. 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 Tech-
   tronics Industries Co. in 2005. In April 2007, Hoover’s new owner closed the Company’s cam-
   pus in Canton and cut 750 jobs in Ohio. 29
                                                   Jim Replace, president of the International Brother-
“	Wal-Mart	said	they	                           hood of Electrical Workers Local 1985 in Canton, blamed
  would	love	to	buy	                            Hoover’s demise on retailers like Wal-Mart for pressuring
                                                domestic manufacturers to move production offshore to
  from	us...but	the	                            cheaper areas.30
  cost	differential	is	so	
  great	that	they	told	                         Kentucky Derby Hosiery Company
  us	unless	we	supply	                             Kentucky Derby Hosiery, a sock manufacturer that sup-
  them	out	of	China,	we	                        plied Wal-Mart for 40 years, closed its sock finishing plant
  couldn’t	do	business.”                        in Hickory, North Carolina in 2006.31 Kentucky Derby’s
                                                largest customer, Wal-Mart, accounted for at least 20 per-
      —	Dave	Eglinton,	L.R.	Nelson	CEO          cent 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 Coordina-
   tor 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 work-
   ing people with the power to make work pay for everyone. The seven affiliated unions are: Service Employees Interna-
   tional 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   5
      1    JWT Employment Communications, “Layoff Report,” (accessed June 18, 2007).
      2    “Wal-Mart Stores 2005 Supplier of the Year,” Wal-Mart Website (accessed June 18, 2007).
           WMStoresWeb/; “Wal-Mart Announces Suppliers of the Year,” PR Newswire, April 14, 2000.
      3    “Is Wal-Mart Good for America? Interview Gary Gereffi,” Frontline, (accessed June 18, 2007).
      4    “Gladstone Capital Quarterly Shareholders Call,” Gladstone Capital, February 10, 2005. 70% figure does not include food
      5    Rob Scott & Economic Policy Institute, The Wal-Mart Effect: Massive Chinese Imports Eliminated 200,000 U.S. Jobs, 2001-
           2006, June 26, 2007.
      6    Form 10-K Fiscal Year 2001 to Fiscal Year 2006, Wal-Mart Website (accessed June 18, 2007). http://investor.walmartstores.
      7    Bureau of Labor Statistics, “Table 1. Civilian labor force and unemployment by state and metropolitan area: April 2007,” (ac-
           cessed June 18, 2007).
      8    Sam Walton, “Wal-Mart Company Memorandum,” March 14, 1985 (accessed June 18, 2007). http://www.wakeupwalmart.
      9    Marcus Kabel, “Union Group Attacks Wal-Mart Over Goods Made in China,” Chicago Tribune, May 31, 2007 (accessed June
           18, 2007).,0,3896584.story?coll=chi-bizfront-hed.
      10   CLSA Asia-Pacific Markets, “CLSA’s China Reality Research,” May 30, 2007.
      11   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).
      12   “Informe de Responsabilidad Social Y Sustentabilidad 2006,” Wal-Mart de Mexico Website (accessed June 18, 2007). http://
      13   Asda press release, “Asda Launches New ‘Made in UK’ George Clothing Range,” Asda Website (accessed June 18, 2007);
           available from
      14   “Is Wal-Mart Good for America? Interview Gary Gereffi,” Frontline, (accessed June 18, 2007).
      15   Charles Fishman, The Wal-Mart Effect, (The Penguin Press, 2006) 86.
      16   Ibid., 88.
      17   JWT Employment Communications, “Layoff Report,” (accessed June 18, 2007).;
           “Wal-Mart Stores 2005 Supplier of the Year,” Wal-Mart Website (accessed June 18, 2007).
      18    Jack Ward, Russell Corp. CEO, “Russell Corporation Investor Conference Call,” Final Fair Disclosure Wire, January 20,
      19   Jay Reeves, “Russell to Cut 2,300 Jobs by Late 2007,” The Associated Press, January 20, 2006.
      20   Russell Hubbard, “Russell cuts 550 Alabama Jobs, More to Come,” Birmingham News (Alabama), January 21, 2006.
      21   Form 10-K, Fiscal Year Ending December 25, 1994. Hasbro Website (accessed June 18, 2007).
      22   Form 10-K, Fiscal Year Ending December 31, 2006, Hasbro Website (accessed June 18, 2007).
      23   Ibid.
      24   Form 10-K, Fiscal Year Ending December 28, 2003. Hasbro Website (accessed June 18, 2007).
      25   Charles Fishman, The Wal-Mart Effect, (The Penguin Press, 2006) 249.
      26   Steve Tarter, “L.R. Nelson Cuts 80 Jobs: Company Shifts Production of Sprinklers to China,” Peoria Journal Star, May 24,
      27   Charles Fishman, The Wal-Mart Effect, (The Penguin Press, 2006) 255.
      28   Michael Arndt, “Sucking the Life Out of Hoover,” BusinessWeek, August 25, 2005 (accessed June 18, 2007). http://www.
 ; JWT Employment Communications, “Layoff Report,” (accessed
           June 18, 2007).
      29   M.R. Kropko, “New Owner Announces Closings, Job Cuts at Hoover’s Home Base,” The Associated Press, April 2, 2007.
      30   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.
      31   “Hickory Sock Manufacturer to Close Plant,” Charlotte Business Journal (North Carolina), June 8, 2006.
      32   James Sebenius & Ellen Knebel, “William Nichol, Jr. and Kentucky Derby Hosiery: Negotiating with Wal-Mart (A),” Harvard
           Business School Publishing, November 7, 2006.
      33   “Is Wal-Mart Good for America? Transcript” Frontline, (accessed June 18, 2007); available from
      34   “Gildan to Close Plants, Jobs Cuts,” The Associated Press, September 27, 2006.

6   Wal-Mart Locks in China, Locks Out American Workers

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