Wal-Mart's embrace of 'Made in America'August 23, 2013: 1:31 PM ET
The retailer wants to rebuild the middle class with good manufacturing jobs -- and enlists Jeff Immelt and others to help at a high-profile confab.
By Erika Fry, reporter
FORTUNE -- Right around the time Wal-Mart Stores (WMT) CEO Mike Duke took the stage Thursday at the company's much-heralded U.S. Manufacturing Summit -- a two-day confab including governors, CEOs, and Wal-Mart executives designed to promote American manufacturing -- something less pleasant was going on outside the company's Washington, D.C. offices, where nine former Wal-Mart employees were arrested for protesting the retailer's low wages and labor practices.
The stunt might well have been planned to dampen, if not upstage, Wal-Mart's own. The protest group's ploy hardly worked; the summit's opening day, co-hosted by the National Retail Federation and attended by 1,500 retailers, suppliers, and government officials, went on without a hitch.
The day was an homage to manufacturing in the U.S., an effort that has been a priority for Wal-Mart since earlier this year when it pledged to buy an additional $50 billion in U.S. products over the next decade. (Wal-Mart took in $469 billion in revenues in 2012.) Duke shared the stage with U.S. Secretary of Commerce Penny Pritzker, who heralded the efforts and America's coming manufacturing "renaissance." Eight governors -- including Mississippi's Phil Bryant, who dressed in Sam's Club slacks for the occasion -- spoke throughout the day of their enthusiasm and readiness for the return of U.S. manufacturing, citing factors including slashed taxes, cheap energy, and new specially-tailored degree programs. And some high-profile Wal-Mart suppliers, including Chobani yogurt founder Hamdi Ulukaya and General Electric (GE) CEO Jeffrey Immelt, made the case for making things in America and announced new investments to do so: Ulukaya spoke of his new yogurt plant in Idaho, the world's largest; Immelt announced the creation of 150 new GE jobs in Illinois and Ohio to manufacture high-efficiency light products. All made the case for making things in America, and for working with Wal-Mart.
That the summit was brought to you by Wal-Mart, a company widely associated with cheap, foreign-made goods, may raise some eyebrows. But that the world's largest retailer is coaxing its suppliers back to the U.S. is less surprising than it may sound.
In fact, if anything, one could argue Wal-Mart is late to its own party. America's reshoring movement has been underway for a while now. Thanks to cheap energy and rising labor costs in Asia, many companies in recent years have found that it makes better business sense in many cases to produce in the U.S. GE decided to fire up long-unused parts of its Appliance Park, Ky. plant to make new water heaters, dishwashers and French-door refrigerators several years ago. Caterpillar (CAT) opened a factory in Texas last August to build excavators. Even Apple (APPL) announced it would invest $100 million to produce computers in America last year.
Indeed, few phrases have as much cachet as "Made in America" these days -- a post-recession rallying cry and a goal deemed worthy by left and right alike -- as well as tribes of DIY-inclined, artisanal-cheese-making hipsters.
Wal-Mart, of course, has a long history with the phrase "Made in America." It was both the subtitle of founder Sam Walton's autobiography (written with former Fortune managing editor and Time Inc. editor-in-chief John Huey) and a focus of the company's long-running "Buy America" campaign. Launched in 1985, the campaign came to an ignominious end in 1992 when NBC's Dateline exposed that products displayed in Wal-Mart stores as "Made in America" were actually imported from Bangladesh.
As for yesterday's D.C. protest, as small and scrappy as the stunt may have been, it underscores some real issues for the retailer and the delicate dance it had to do at yesterday's summit -- promoting American manufacturing as a means to rebuild the middle class while defending its own famously low wages (and fighting against an increase to the minimum wage) as an equal part of that American dream.
Wal-Mart's wages and labor practices have faced increasing scrutiny and attention in recent months, due to worker strikes and Wal-Mart's standoff with the District of Columbia's City Council over a "living wage" bill that would force it and other large retailers to pay employees no less than $12.50 per hour (rather than $8.25, D.C.'s minimum wage). Wal-Mart has said the bill, if passed, would jeopardize its plans for six stores in the District.
At the summit, Bill Simon, Wal-Mart U.S. president and CEO, made clear his company's concern for the erosion of America's middle class and its belief that Wal-Mart's wages are neither the problem nor the solution.
"Some people say the answer is to just raise up the entry level jobs -- to keep inflating wages at the bottom until an entry-level job pays as much as a professional job," Simon said. That, he pointed out, doesn't address "the real issue -- the lack of jobs in the middle." He touted the important role of entry level jobs as a "starting point," citing his own experience working as a dishwasher for $2.10 an hour.
"The solution isn't to get rid of these starting points," he said. "The solution is to fill in the middle with more good jobs." Those jobs, Simon argues, are in manufacturing.
For his part, CEO Duke made it clear Wal-Mart will be ready to support the newly employed manufacturing workers -- if not with good middle class jobs, then with American-made goods they can buy for cheap. After Immelt announced GE's 150 new positions, Duke joked, "We need to build a couple more Wal-Mart stores right next to those plants."