Walmart Creates $10 Million Fund to Stimulate American Manufacturing

Posted by Unknown on Thursday, January 23, 2014

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Business Day |Walmart Creates $10 Million Fund to Stimulate American Manufacturing

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WASHINGTON â€” William S. Simon, chief executive of Walmart for the United States, said on Thursday at the United States Conference of Mayors that the company was providing a $10 million fund to promote American manufacturing in a public push to sell more American-made products.

The fund, to be distributed over five years, will award grants for new manufacturing processes and help to encourage such projects in this country, a company spokeswoman said.

Early last year, Walmart said it would increase sourcing of American-made products by $50 billion over a 10-year period, buying goods already made here and helping vendors bring production back from overseas.

Showcasing Walmartâ€™s power with manufacturers as the nationâ€™s largest retailer, Mr. Simon told the mayors that one of its suppliers, Kent International, a maker of bicycles, planned to move its operations to South Carolina from overseas, where it would create at least 175 jobs and assemble half a million bikes annually by 2016.

This announcement comes in the face of growing clamor for a higher minimum wage in the United States. In November, White House officials said they would support an increase in the federal minimum wage to $10.10, from $7.25 an hour, but fierce opposition in the Republican-controlled House means that the chance of an increase, at least in the near term, are slim.

Major retailers and fast-food companies have said a higher minimum wage would force them to reduce work force numbers or raise prices. Retail workers nationwide receive a median of about $9.60 an hour, or less than $20,000 a year.

Mr. Simon said that the company had yet to analyze the effects that raising the minimum wage would have on operational decisions and costs, but he speculated that it could lead to wage compression or increased component costs.

â€œI think it addresses a symptom,â€ Mr. Simon said of proposals for an increase. â€œIt doesnâ€™t address the illness.â€

The company also said on Thursday that it would hold a second summit on American manufacturing in August. The first was last August.

Now is a time of transition at Walmart. Michael T. Duke, the chief executive of the entire company, will retire in just a few days, to be succeeded by C. Douglas McMillon, who has been chief executive of Walmart International for the last several years.

Mr. McMillon, a consummate company insider, first joined Walmart in 1984, while Mr. Simon, who was another possible candidate to succeed Mr. Duke, came to Walmart in 2006.

The transition is occurring at the end of what appears to have been a rocky holiday season for retailers over all. While Walmart has not yet announced its holiday results, many companies have been cutting their earnings forecasts and reporting slim growth over last yearâ€™s holiday season, or no growth at all.

Going into the holiday season, Mr. Simon tempered expectations, warning that the income of Walmartâ€™s core customers was not keeping up with the cost of living. Given that landscape, Mr. Simon said he expected â€œabout as competitive of a market as weâ€™ve ever seen.â€ Such price-slashing can cut into a companyâ€™s profit margins, even at Walmart.