Wal-Mart Pushes Vendors to Open Up Shop on American Soil
Wal-Mart Stores (NYSE:WMT) has a lot on its plate these days — navigating protests against low wages, recall drama in China, and increasingly tight competition from Amazon.com (NASDAQ:AMZN) – but one thing the retailer has been praised for in recent months is its effort to pull back on outsourcing production and increasing the number of job opportunities it offers in the U.S. The Bentonville, Arkansas-based company is one of the biggest retailers whose shelves host many “Made in the U.S.” products, and it prides itself on its pledge to market as many American-made goods as possible.
It’s hard to pinpoint exactly when Wal-Mart pulled the trigger and pivoted from complete outsourced production to more factories in America, but the Washington Post reported Friday that it was only last week that the retailer made its latest announcement about a new plant opening in South Carolina. The factory will manufacture Kent Bicycles and open up many jobs for U.S. workers after sustaining itself in China for many years.
Kent started making bikes in New Jersey back in the 1970′s, but was moved to China in the 1990′s due to lower international labor costs. The plant is now getting moved back to the U.S. on account of the cost of labor rising in China, while work ethic in the country is dwindling. Arnold Kamler, Kent’s CEO explained that, “One of the things we’re seeing now in China is not only the cost of labor going higher, but the workers’ attitude is getting more apathetic. The factories in China are fighting with workers to make sure they don’t take cellphones to the assembly line. This texting thing is crazy. You can’t be concentrating on your job in a factory if you’re sending text messages to your buddies.”
The Post reports that Kent got served with one of Wal-Mart’s “supplier of the quarter” awards last year, and was then able to think about moving some of its production to the U.S. after many years of importing as many as 2.8 million bikes a year. Kent’s business will still continue abroad, but now thanks to increased labor costs in China, it is able to open a new plant in the U.S. without having to justify the imbalance between labor costs in China and America.
The Post reports that Kent initially wanted to open its new place in the company’s home state of New Jersey, but its executives were leery of the the state’s lack of right-to-work law, which makes it easier for unions to organize the staff — a practice Wal-Mart is not fond of. After failing to find something that felt right in South Carolina, Kent then toured the Eastern seaboard and visited Clarendon Country in South Carolina, and found the state’s 12.2 percent unemployment rate appealing, along with its maintenance of a few other medium-sized factories.
Kent executives weighed the pros and cons of opening up shop in Clarendon, and they enlisted consultants from Deloitte to weigh the incentives of laying claim to territory in the city. The Post reports that Clarendon offered to train all of Kent’s workers for free, and pledged to kick in a set of tax subsidies in exchange for Kent getting to a promised employment level of 175 people. Bringing a factory to a city or town is extremely lucrative for that area, as it is expected to sustain itself and its workers there for generations — and Clarendon’s governing body was willing to make sure that happened.
Now, Kent plans to invest about $4.5 million in the plant over three years, realize a peak production level of half a million bikes a year, and pay people “substantially over minimum wage.” Wal-Mart is Kent’s biggest buyer, ordering more than half the bikes sold in the U.S., and the Post reports that the retailer gave it the nudge it needed to lay ground in the country where Wal-Mart is working to keep its commitment to curb outsourcing. So now, in a strange turn of events, we have Wal-Mart to thank for some of its employee practices in the U.S.