mm457: From the guys who helped put China in business

August 3, 2008

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© John Leaver | Dreamstime.com

MUDGE’s Musings

Used to be, if you were annoyed by the antics of big business, you’d pick on General Motors, world’s biggest, most arrogant, automobile manufacturer.

Difficult to be anything but sorry for GM these days, as they Hummer their way into business oblivion.

No, these days if you want to vent your spleen regarding unpleasant aspects of big business, Wal-Mart is your most appropriate target.

After all, these are the guys who have rolled back prices so relentlessly that they’ve rolled up entire industries and sent the jobs and our treasure to China, at the expense of zillions of decent paying blue collar jobs in the U.S.

And, as an employer, they are infamous for poor pay, are niggardly with benefits, and have fought an equally relentless battle against unionization, lest their workers have any real means of changing their working conditions.

Those friendly greeters? Just minimum wage retirees who are really posted at the door not to smile weakly at you, but rather to make sure that shoplifters exiting the store are caught.

Just to be certain that their own underpaid and cowed staff stays that way, they have begun a campaign, documented by the Wall Street Journal, no less, to warn their managers and supervisors that a prospective Democratic presidential administration endangers Wal-Mart’s non-union status.

wallstreetjournal

Wal-Mart Warns of Democratic Win

By ANN ZIMMERMAN and KRIS MAHER | August 1, 2008; Page A1

Wal-Mart Stores Inc. is mobilizing its store managers and department supervisors around the country to warn that if Democrats win power in November, they’ll likely change federal law to make it easier for workers to unionize companies — including Wal-Mart.

In recent weeks, thousands of Wal-Mart store managers and department heads have been summoned to mandatory meetings at which the retailer stresses the downside for workers if stores were to be unionized.

According to about a dozen Wal-Mart employees who attended such meetings in seven states, Wal-Mart executives claim that employees at unionized stores would have to pay hefty union dues while getting nothing in return, and may have to go on strike without compensation. Also, unionization could mean fewer jobs as labor costs rise.

Wal-Mart is far from the only employer that opposes the Employee Free Choice Act (co-sponsored, by the way, by a certain junior senator from Illinois), but as the largest private employer in the U.S. they certainly have the most to lose, and that largest body of private employees in the U.S. has the most to gain.

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mm403: Blast from the Past! No. 26

June 7, 2008

MUDGE’s Musings

We embark this weekend on a business trip to a conference in Boston. As conferences usually take up a great deal of uptime, without the downtime associated with a normal schedule, we will probably cover many of our daily blogging deadlines with Blasts from the Past!

The conference itself, designed to illuminate the social networking phenomena in the context of business and corporate conduct, may provide the opportunity to blog, as blogging in the corporate environment is one of its key topics. So we may be able to mix business interests and responsibilities with our avocation in this space. Should be interesting!

There’s most read, and then there’s favorite. This is a post which yr (justifiably) humble svt is, regrettably, but not regretfully, not at all humble about.

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Blast from the Past!

A post we really, really loved to write, and read, and re-read…

From last summer, originally posted September 10, 2007 and originally titled “China – Two interesting aspects”.

MUDGE’S Musings

China is always in the news. Two stories from the past few days illuminate why in some interesting ways.

First, from the LA Times, a look at how we have become victim’s of our unlimited appetite for everyday low prices.

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Analysts expect prices in the U.S. to creep up as safety standards are reevaluated. Buyers and retailers may share the impact.

By Don Lee and Abigail Goldman
Los Angeles Times Staff Writers
September 9, 2007

SHANGHAI — Get ready for a new Chinese export: higher prices.

For years, American consumers have enjoyed falling prices for goods made in China thanks to relentless cost cutting by retailers such as Wal-Mart and Target.

But the spate of product recalls in recent months — Mattel announced another last week — has exposed deep fault lines in Chinese manufacturing. Manufacturers and analysts say some of the quality breakdowns are a result of financially strapped factories substituting materials or taking other shortcuts to cover higher operating costs.

Now, retailers that had largely dismissed Chinese suppliers’ complaints about the soaring cost of wages, energy and raw materials are preparing to pay manufacturers more to ensure better quality. By doing so, they hope to prevent recalls that hurt their bottom lines and reputations. But those added costs — on a host of items that include toys and frozen fish — mean either lower profits for retailers or higher prices for consumers.

“For American consumers, this big China sale over the last 20 years is over,” said Andy Xie, former Asia economist for Morgan Stanley, who works independently in Shanghai. “China’s cost is going up. They need to get used to it.”

Read the rest of this entry »


mm136: China – Two interesting aspects

September 10, 2007

MUDGE’S Musings

China is always in the news. Two stories from the past few days illuminate why in some interesting ways.

First, from the LA Times, a look at how we have become victim’s of our unlimited appetite for everyday low prices.

latimes

Analysts expect prices in the U.S. to creep up as safety standards are reevaluated. Buyers and retailers may share the impact.

By Don Lee and Abigail Goldman
Los Angeles Times Staff Writers
September 9, 2007

SHANGHAI — Get ready for a new Chinese export: higher prices.

For years, American consumers have enjoyed falling prices for goods made in China thanks to relentless cost cutting by retailers such as Wal-Mart and Target.

But the spate of product recalls in recent months — Mattel announced another last week — has exposed deep fault lines in Chinese manufacturing. Manufacturers and analysts say some of the quality breakdowns are a result of financially strapped factories substituting materials or taking other shortcuts to cover higher operating costs.

Now, retailers that had largely dismissed Chinese suppliers’ complaints about the soaring cost of wages, energy and raw materials are preparing to pay manufacturers more to ensure better quality. By doing so, they hope to prevent recalls that hurt their bottom lines and reputations. But those added costs — on a host of items that include toys and frozen fish — mean either lower profits for retailers or higher prices for consumers.

“For American consumers, this big China sale over the last 20 years is over,” said Andy Xie, former Asia economist for Morgan Stanley, who works independently in Shanghai. “China’s cost is going up. They need to get used to it.”

The low hanging fruit of lowest prices for decent quality has run into a rising standard of living in China, and the results have been ugly.

The bulk of the world’s toys are made in southeastern China, where wages have shot up in the last couple of years amid greater competition for workers and increases in minimum wages and living costs. Booming demand has pushed up commodity prices. The appreciation of the Chinese yuan, up 9% against the dollar in the last two years, also has hurt some factories, as they are paid in dollars.

Follow the link to the rest of the story, reported from Shanghai.

[Per L-HC’s reformed process, please click the link below for the complete article — but then please come on back!]

Los Angeles Times: Fixing Chinese goods will be costly

So, what with rising wages, increases in commodity prices, the unexpected new costs of safety inspections, prices for toys, tilapia, luggage, and an entire big box store full of consumer necessities (and not so) will go up.

So, now let’s turn to the other side of the consumer equation, courtesy of the always perceptive Daniel Gross of Slate.

slate

Pundits bemoan our trade deficit with China. But those container ships aren’t heading home empty.

By Daniel Gross
Posted Saturday, Sept. 8, 2007, at 7:59 AM ET

Economists make a big deal out of all the junk we import from China: tainted pet food, lead-laced toys, and enough cheap plastic tchotchkes to load up a landfill the size of Montana. And American industries are clearly being drenched by the rising tide of Chinese imports, which totaled $288 billion in 2006. But as imports from China loudly rise, American exports to China are quietly rising at an even more rapid pace. Would it surprise you to learn that a lot of those exports are … junk?

In an act of macroeconomic karma, materials thrown out by Americans—broken-down auto bodies, old screws and nails, paper—accounted for $6.7 billion in exports to China in 2006, second only to aerospace products. Junkyards may conjure up images of Fred Sanford’s ratty collection of castoffs. But these days, scrap dealers are part of a $65 billion industry that employs 50,000 people, who together constitute a significant arc of a virtuous circle. The demand of China’s factory bosses for junk—which they recycle to make all the junk Americans buy from China—creates jobs, tamps down the growth of the trade deficit, and might help save the planet.

Exports to China second only to aerospace products? Junk?

And this is a good story for all of you greens out there (MUDGE is always happy to assist his environmentally sensitive fellow citizens. Feel free to use yesterday’s post to wrap fish.):

The booming China trade isn’t simply good news for shareholders of Metal Management, whose stock is up 67 percent in the past year. It’s good news for tree-huggers. Every scrap of scrap put on a slow boat to China is one less scrap that winds up in a landfill or an incinerator. Asia’s insatiable demand for scrap has boosted prices, thus encouraging companies to suck more reusable junk out of garbage piles.

An interesting twist, eh? The imbalance is less so. That’s always good news.

Take a look:

[Per L-HC’s reformed process, please click the link below for the complete article — but then please come on back!]

The junk we send to China. – By Daniel Gross – Slate Magazine

A couple of things about this story are intriguing.

1) The story refers to corrugated paper, a key element of MUDGE‘s once family business. $130 ton for scrap corrugated boxes (the brown shipping containers everything wears to market) is an astounding price.

2) The idea of sending scrap overseas resonates in a slightly unpleasant way with us ancient curmudgeons. MUDGE was born after WWII (believe it or not!), but the lessons of that conflict were fresh.

In the years before Pearl Harbor projected the U.S. belatedly into a conflict that had started up in Asia in the early Thirties, scrap iron and steel in massive quantities made its way across the Pacific to, wait for it, Japan.

It was a bitter realization that many of those junked Model T’s and scrapped steam heating radiators were sent back to our combatants as Japanese aircraft and ships and bombs.

Is it too paranoid to make an association with cheerfully sending our scrap to a rapidly arming and increasingly assertive about its global destiny China?

So, two interesting China stories, one from each container port.

And did you catch the punch line from the LA Times piece?

Meanwhile, Skyway is gearing up to open a factory this fall in Vietnam, where wages are lower.

“I think the consumer will not accept the full impact of price increases from China,” Wilhoit said. “We’re going to have to do things differently, like Vietnam, to get the same quality stuff on the shelf and make money.”

The mind boggles.

It’s it for now. Thanks,

–MUDGE