All entries for Saturday 18 February 2006
February 18, 2006
The Independent writes about comments made by Wal-Mart CEO to a disgruntled manager. The manager in question wanted to know why such a large company wasn’t doing more for its low-wage employees.
The manager had asked Mr Scott why "the largest company on the planet cannot offer some type of medical retirement benefits?" Mr Scott replied: "Quite honestly, this environment isn't for everybody. There are people who would say, 'You should take the risk and take billions of dollars out of earnings and put this in retiree health benefits and let's see what happens to the company'. If you feel that way, then you as a manager should look for a company where you can do those kinds of things."
Scott’s ‘take it or leave it message’ certainly won’t do anything to help the firm’s already run-down reputation. That said, Scott has a point, which is bolstered by an observation about the problems facing General Motors he makes in the full letter here.
GM has seen failing demand for its products over time and has underestimated its pension liabilities. Its future as a firm is sometimes questioned. For more, see this NYT article
"The thing that annoys me about GM is that when I retired I had a letter that said I would receive health care for life at no cost," said Chester Clum, 79, a former sales and service manager at GM who retired in 1981 after 38 years of service. "They never brought up that they could change that at will." But, in fact, the change has been long in coming. While there are exceptions in industries less subject to intense competition, GM is like many other once impregnable American corporate titans in arguing that reducing the burden of caring for retirees has become essential to compete against foreign companies with lower benefit costs and domestic rivals with younger work forces and less generous benefit packages.
With retirees living longer and accounting rules forcing companies to more honestly reflect their full costs on their books, the corporate-sponsored social contract is no longer sustainable. Something else, experts say, needs to replace it.
"It was easy to offer these things 40 years ago because they were cheap," said Paul Fronstin, director of the Health Research and Education Program at the Employee Benefit Research Institute, a nonpartisan group in Washington. "They're not cheap anymore."
Wal-Mart could certainly pay it’s staff more and contribute towards healthcare plans but it comes at the cost of a) taking on fewer people in the first instance b) being more vulnerable to competitors c) being more vulnerable to economic changes that affect all companies. The effects of the first are more immediate whereas the latter two get ignored because they’re non-tangible probabilities. None of these things are good for the groups who’re supposed to gain from higher wage/non-wage benefits. Of course the scale of the benefits granted by the ailing GM may dwarf those Wal-Mart’s employees are asking for; after all, many firms offer good packages without any problems. The main point is that one-sided accusations of greed and exploitation are unfair.