Wal-Mart Stores Inc. spearheaded an effort Thursday to bring together retailers, suppliers and government officials, so they can figure out how to bring more manufacturing jobs to the United States.
The world’s largest retailer hosted its first two-day U.S. Manufacturing Summit in Orlando, hoping to capitalize on the company’s recent commitment to drive more manufacturing in the U.S. The “Made in the USA” campaign could boost Wal-Mart’s image, which is constantly under attack by labor-backed groups who have criticized the retail behemoth as a destroyer of U.S. jobs, rather than a creator.
The goal of the summit was to start “connecting the dots” with a dialogue among the 500 manufacturers, officials from three dozen states, eight governors and U.S. Commerce Secretary Penny Pritzker at the conference, said Bill Simon, president and CEO of the company’s U.S. division.
“It could be difficult for one at a time, all of us on our own,” Simon said. “The best way to overcome the challenges is to talk to one another.”
The summit comes seven months after the Bentonville, Ark.-based discounter pledged to buy $50 billion more U. S. made goods over the next decade. That’s the equivalent of just over 10 percent of what Wal-Mart will sell at retail this year. Wal-Mart said that if other merchants do the same, it would mean an additional $500 billion in American-made goods, over the next decade.
Several companies were quick to get into the spirit at the summit. Kevin Toomey, president and CEO of Kayser-Roth Corp., a North Carolina-based legwear hosiery manufacturer, said his company would create over 100 jobs with a $30 million investment, and sock manufacturer Renfro Corp. announced a $10 million investment that would bring 195 U.S. jobs.
Jeff Immelt, chairman and CEO of General Electric Corp., announced that the company would be bringing 150 manufacturing jobs to plants in Illinois and Ohio, where high-efficiency lighting will be built. The $30 million investment will be at plants in Circleville, Ohio; Bucyrus, Ohio; and Mattoon, Ill.
“We wanted to be a part of this,” Immelt said. “This is a first step.”
To be sure, even if Wal-Mart is successful in getting key retailers and suppliers on board, experts say it won’t rejuvenate the U.S. manufacturing industry. But the movement could help stem the tide of jobs flowing to China and elsewhere that has been occurring in the last two decades.
Some experts are skeptical, pointing out that Wal-Mart led the migration of manufacturing jobs overseas in search of the cheapest labor, veering away from the principles of its late founder Sam Walton, who espoused buying American-made goods.
In fact, Burt Flickinger III, president of retail consultancy Strategic Resource Group, says that what will be brought back will only be a fraction of business sent overseas.
“It’s a very positive PR move for the company,” Flickinger said. “But it took two decades to unwind the American manufacturing base and it will take two decades to bring it back.”
This is not the first time that Wal-Mart has pledged a made-in America campaign. A similar program it pushed in the mid-1990s fizzled, because it couldn’t get enough low-priced goods to sell to its low-income shoppers. But executives vow that its current efforts go well beyond a marketing campaign and involve dissecting each of its 1,300 product categories, from bath towels to gadgets, to determine which can be made domestically.
It’s also reaching out to state and local officials, to work with suppliers in exploring rebates, training and other programs, to attract U.S. makers. Additionally, the discounter says it’s changing the way it does business with suppliers, giving multi-year commitments for basic goods where it makes sense, instead of doing season-by-season ordering.
Rebuilding U.S. manufacturing jobs is resonating even more these days. The nation’s unemployment rate of 7.4 percent, while now at a 4 1/2-year low, is still well above the five percent to six percent typical of a healthy economy.
Meanwhile, Wal-Mart and other major retailers have been under fire, for not doing a better job of monitoring worker safety in factories overseas. That pressure increased after a factory collapse this past spring in Bangladesh, which killed 1,129 people. That was the deadliest incident in the history of the garment industry.
But what could really propel the movement, this time around, is pure economics. Labor costs are rising in Asia, while oil and transportation costs are high and increasingly uncertain.
Rising wages have erased some of the competitive advantages China had in manufacturing, Wal-Mart’s Simon said, and manufacturing jobs offer a path into the U.S. middle class.
“We think we can map out opportunities and put some systems in place, and commit to this for the long term,” Simon said. “There’s nothing less than the future of our country at stake here.”
Wal-Mart said several manufacturers had told executives privately that they had defined “tipping points,” at which making goods overseas will no longer make sense. Wal-Mart says it doesn’t believe that its customers should pay more for made-in-America goods, and that it is focusing on working with suppliers, to make sure prices are in line with what shoppers want to pay.
“It’s an economic advantage when you have the wind at your back, instead of in your face,” said Hal Sirkin, a senior partner and managing director at the Boston Consulting Group and an expert on manufacturing. He is serving as a consultant to Wal-Mart. He believes that the movement could create 100,000 more jobs in the next decade.
Wal-Mart, with more than 4,000 stores in the U.S. and about $460 billion in total sales, has proven that it has the clout to get other suppliers and merchants on board. For example, in 2009, Wal-Mart created a coalition among stores, suppliers, government, nonprofit organizations and academic experts, for a sustainability index that measures whether goods were made in a responsible way, and whether the materials used are safe.
Wal-Mart has said that items made, sourced or grown in the U.S. account for about two-thirds of the company’s spending on products for its U.S. business, according to data given by suppliers. But analysts say that much of its clothing, home furnishings and consumer electronics are made elsewhere.
One company to come on board is Sleep Studio, which is now working with Wal-Mart to produce memory foam mattress toppers. Previously, all of the discounter’s toppers were produced by manufacturers overseas. This year, 20 percent will be made in the U.S.
CEO Michael Rothbard said Wal-Mart worked with the company to streamline the costs, eliminating $10 from the price tag. The New York-based company has factories in California and Georgia.
“The selling process was really intense,” Rothbard said. “We had to convince them our products offered unique benefits, and that we could meet their needs.”