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Saturday, April 07, 2007

Wal-Mart is Spinning More than Merchandising

Jeff Goldberg in the 4/2//07 New Yorker provides insight into the corp-speak mentality of Wal-Mart. The purveyors of said speak is a cadre of fugitives from the Washington PR-lobbying firm of Edelman led by Leslie Dach. Dach’s resume reveals a man with a turning coat demonstrating his ethical ambidexterity by switching from justifying Heinz dolphin slaughtering to managing the DNC convention for Gore to spinning for Wal-Mart. As the 2nd largest US company next to Exxon with revenues of $315 Bil. and profits of $11 Bil. with a reputation of misery pay and benefits to its 1.8 mil employees as well as being union hostile, i.e. busting the meat cutters union in the entire state of Texas, utilizing a mobile squad of union busters, Wal-Mart is currently defending against a class-action suit alleging promotion and equal pay denial that is expected to be settled for $5 Bil. Claiming average pay at Wal-Mart is $10.51 per hour, objective estimates are less than $9. As reported previously in this Blog, Costco pays an average wage of $17.46 per hour. The company is not nearly so penurious with its top management including CEO Lee Scott whose salary and bonuses totaled $15.7 mil. last year. Enter former Edelman staffer Dach as VP Corporate Affairs at Wal-Mart to rework the company image. First, he set up a front organization passed off as Americans that typically work and shop at Wal-Mart called Working Families for Wal-Mart, a tactic now labeled as “astoturfing.”. In fact, this was no such thing, but a group of Wal-Mart funded ringers responding to doctored surveys which not surprisingly concluded Wal-Mart is delightful. Other company gambits of deception include a drug discount program for employees that turn out to cover a very small percent of the total purchased and of vintage stock, largely superseded by more advanced drugs. Wal-Mart spends an average of $3500 per employee on health care benefits compared with the $4500 average for the retail industry. Wal-Mart’s plan saddles workers with a $3000 deductible that is unaffordable to their workforce that averages $17,000 per year in wages with a wage cap for long term employees for workers earning between $13 and $18 per hour, i.e. a de facto forced attrition program. Another Dach invention is the Jobs and Opportunity Zone camouflage for Wal-Mart entry into urban areas in the guise of employment for minorities, but which has produced few such jobs, and, as widely documented, has decimated the resident retailers and the jobs they provided. In the face of mounting PR melt downs, Wal-Mart is initiating a supply chain greening program driven by reductions in energy consumption, a cost cutting, profit booster passing as environmentalism. As a final grasp at a defensible straw, Wal-Mart argues that providing their 1.8 Mil. Employees at $2/hour raise would reduce their profits (per employee) by 67%. That seems realistic. The 1.8 mil Wal-Mart employees work 3.6 Bil hours per yr. (1.8 mil X2000 hrs /yr. =3.6 Bil). Therefore, it would take $3.6 Bil from profits to generate a $1 wage increase per hour and 2X $3.6 Bil. =$7.2 Bil to generate a $2 wage increase per hour. Taking this $7.2 Bil from the company’s $11 Bil. profit would reduce a $11 Bil profit to a $3.8 Bil loss sending Wal-Mart’s stock price spiraling down. The $11 Bil profit translates into only a 3.5% net margin. For Wal-Mart to provide employees a living wage, the company has to become more efficient and more profitable.


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