Wal-Mart throws in the towel in Germany as social dumping did not work

Wal-Mart has thrown in the towel in Germany and will sell its 85 hypermarkets to the Metro Group. The American retailer was never able to run its German operations profitably. From morning cheers to cutting personnel and closing stores, almost everything was tried, but still it did not work. They just did not get their concept right.

Goodbye, Germany. Wal-Mart was never a good corporate citizen in Europe's largest economy, but its workers were well organised and could keep the company at bay. Now the Bentonville managers have seen that walmartization of working life does not work where unions are strong, be it here or in South Korea which the company is also leaving.

When the Bentonville multinational tried to establish its American business concept in Germany, things started to go wrong. Shopping patterns were different, as was competition. There were also questions asked about whether the company had really bought the right store network.

It was not even enough to subsidise the German operations with money earned through low wages and poor helth insurance in Wal-Mart's main US markets. Allowing the bottom line in Germany to go red by hundreds of millions USD and engaging in brutal price wars in vain attempts to gain market shares, Wal-Mart tried to use its dominant global market position to press its competitors.

Wal-Mart's concept does not travel

But Wal-Mart's concept does not travel, Metro Group CEO Hans-Joachim Körber said a few years ago. Today we can see that he was right, when Germany's Wal-Marts now will turn into Real hypermarkets. Metro is Germany's largest retailer and number three in the world. It operates Metro Cash & Carry markets, Real hypermarkets, Extra supermarkets, Kaufhof department stores and Media Market and Saturn home electronics stores. Only a few days ago, it added a chain of Geant hypermarkets in Poland to its Real subsidiary, buying them from French retail multinational Casino.

The Metro Group is engaged in a constructive global social dialogue with UNI Commerce, and has declared full respect for workers' and trade union rights. If the take-over of Wal-Mart gets finally approved by the authorities, one should expect that the buyer will take care of its responsibilities towards all the Wal-Mart workers. Ver.di, which has strong union structures in place in both companies, will surely do a solid job in looking after the workers' interests.

Wal-Mart resorted to its typical bad behaviour

Back to the US retail giant. Instead of seeing their personnel as an asset, Wal-Mart resorted to its typical bad employer behaviour when it continued to experience problems in Germany. The works councils started to encounter obstacles when carrying out their functions. Ver.di got a cold shoulder response when it tried to negotiate a collective agreement. Workers' representatives were threatened with store closures if they did not make concessions. These were just some of their unwise measures which also signalled management's nervousness.

Instead of investing in its personnel, Wal-Mart resorted to its Bentonville principles. The results were often so strange that the German workers did not know whether they should laugh or cry. - We are no clowns, we are workers, many said when morning cheers were imposed by management, and made sure they were busy with something else when the circus was on. The ban on love affairs that the Bentonville managers tried to impose was received with wry smiles. But the anonymous informers' hotline that Wal-Mart wanted to install brought back disturbing collective memories to many Germans and other Europeans, and already the proposal to do this was taken very badly by them.

Wal-Mart stumbled on its anti-union approach

Of course, all this did not work. Either the measures fell on their own impossibility, or were declared illegal by the courts, such as the ethics code which was supposed to be put in place with its love-bans and informer lines a few years ago. Actually, Wal-Mart stumbled once again on its anti-union approach, it had neglected to consult with the central works council before announcing the measures.

And the collective agreement? First, Wal-Mart refused to enter into the general state-level collective agreements or to negotiate its own deal with ver.di, Germany's large commerce union. Then the union forced Wal-Mart to apply all the collective agreement provisions although they had not formally signed it. When management reluctantly had agreed to this, they posted leaflets on their bill-boards, complaining that this bad trade union had forced them to respect collective agreement levels for workers' wages and working conditions. Once again, they shot themselves through the foot.

Wal-Mart's leaving Germany with the tail between its legs is quite different from the picture of a successful and competitive global retailer that the Bentonville management wants to paint. A strong union movement, demanding customers and tough competition is not a welcoming atmosphere for Wal-Mart's social dumping concept. Only a few months earlier, the Bentonville multinational had to leave South Korea, where it would have faced increasingly strong pressure to change, from both the unions and the local consumers.

Let's look at China now

The recent statement by China's top trade union leader Wang Zhaoguo about Wal-Mart's anti-union approach also in his country is very interesting in this connection. When the president of the All-China Federation of Trade Unions (ACFTU) comes out with more than a hint about possible legal measures to ensure that local trade unions can be established in Wal-Mart stores in China, it should be taken seriously. And yes, also in China it seems to be difficult to compete with Carrefour, world's second largest retailer, which has concluded a global agreement with UNI, and like Metro is engaged in a positive social dialogue and partnership with UNI Commerce.

Also at home, Wal-Mart continues to face difficulties. Chicago's decision to establish a 10 dollar minimum wage for big box store workers and a 3 dollar hourly minimum level for other benefits has effectively exposed the company's weakness. It was going to pay its South Side workers only 7.25 dollars as an entry wage and has now declared that this will probably remain their only store in the city.

Quite apparently, Wal-Mart is competitive on the US market only because it is exploiting its workers through low wages and poor if any benefits. The reactions have been there - from the Norwegian governments disinvestment to avoid the risk of being accomplices to Wal-Mart's human rights violations, to the shareholders in general expressing their concerns about the retailer's future, through declining share prices. Yesterday, the prices continued to slide and fell by one third of a per cent from the already very low closing on Wednesday.