'Retail' Archive
The answer appears to be “no.” The marriage in question is the 25-year partnership between General Motors and Toyota Motor in a joint venture, New United Motor Manufacturing, Inc. — widely known as NUMMI.
GM this week gave out a brief statement that it could not agree on future product plans with Toyota. The NUMMI plant makes the Pontiac Vibe sport wagon for GM, and production of the Vibe is set to end later this summer — well ahead of the scheduled phase-out of the Pontiac brand.
GM said its 50% interest in NUMMI would stay with “Old GM” — the bankrupt carcass of bad assets and debt that will be left behind when the company emerges from Chapter 11, which could be next week, if the Obama administration’s auto task force can muscle the company’s case through bankruptcy court. “New GM” may be out of bankruptcy reorganization in 40 or fewer days, which would top Chrysler Group’s record of 42 days.
At the NUMMI plant, which is hailed as a highly efficient American implementation of the vaunted Toyota Production System, the UAW-represented workforce makes Tacoma pickups and Corolla sedans for Toyota to sell in North America. What happens to the NUMMI plant now is a big question for Toyota and its new president, Akio Toyoda, the grandson of the automotive manufacturer’s founder.
As the global downturn in the automotive industry took hold last year, Toyota called a halt on completing its new plant in Mississippi, which was going to build the Prius hybrid. Rumors abounded that Toyota would convert NUMMI to Prius production in light of high demand for the third-generation Prius, one of the few car models in the world that’s garnering pronounced popularity. Toyota officially quashed those rumors, however.
Akio Toyoda has a thorny problem in pondering the fate of NUMMI. The factory has long outlived its purpose and value as an experiment in cooperative production. It’s not the traditional practice of the giant Japanese automotive manufacturer to shutter a factory, lock the doors, and throw away the key, as Chrysler and GM did with so many North American plants. (The sprawling NUMMI factory was a GM plant until it was closed in 1982.) Toyota doesn’t do big layoffs. NUMMI is the last car plant in California, it has a unionized workforce of some 4,700 employees, and it’s a highly visible employer in the San Francisco Bay Area. Pulling the plug on NUMMI would be a public-image nightmare for Toyota. Not that it would slow down sales of Toyota vehicles in the US any more than the recession already has, but it would be an international liability to the corporation’s image.
BTW, the NUMMI plant is a few miles north on the Nimitz Freeway from the Great Mall of the Bay Area — a facility that was a Ford Motor plant from 1955 to 1983 and which was redeveloped as a giant shopping mall in 1994. Maybe that could be the future of the NUMMI factory, as well, although the mall business isn’t what it used to be, either.
Drugstore operator Walgreen aims to redefine the term office visit by allowing you to visit the doctor at your office or workplace. After blanketing the nation with more than 6,900 drugstores, retail growth opportunities are slowing and the company is looking for new ways to expand. One area that Walgreen is giving plenty of attention is its Take Care Health Systems (TCHS) business, which manages more than 700 clinics inside Walgreen stores and at worksites. (Customers include QUALCOMM, Goodyear Tire & Rubber and Toyota Motor.) The company recently told Chicago’s Daily Herald that it plans to open “several thousand” work-site health clinics in the coming years to get in on the $7.3 billion market for employer-provided care.
With businesses struggling to reduce employee health care costs and the country on the verge of major health care reform, one could argue this is an idea whose time has come. The work-site clinics provide primary-care physicians (which I understand are in short supply already), nurse practitioners, nutritionists, and other health-related services. Walgreen bought TCHS in 2007 and made two follow-on acquisitions — I-trax and Whole Health Management — in 2008 in a bid to diminish its reliance on retail stores for growth and to diversify into health and wellness services. In January Walgreen launched “Complete Care and Well-Being,” a workplace program designed to cut costs for employers and improve access to health care for employees. The work-site health centers may be staffed by from one to 50 employees (depending on the size of the client) and be paired with Walgreen pharmacies and discount prescription drug plans.
This all sounds good, but I can’t help but think about the school nurse. Not to bash all school nurses, but the ones I encountered during my school days, and more recently during my children’s education, hardly inspired confidence. (My fifth grader swears her school nurse treats everything with a cough drop.) On the other hand, my employer Hoover’s already provides flu shots, blood pressure screening, and other health-related services at well-attended company-sponsored health fairs. It would be convenient to be able to get a throat culture or other simple procedure at work. But beyond routine services, there are privacy issues to consider and I’m not sure all employees would flock to a company doc.
On a related health care note: The world’s largest employer, Wal-Mart Stores, has come out in favor of requiring employers to provide health insurance to workers, much to the dismay of other retailers, large companies, and most Republicans. In a letter to President Obama dated June 30, Wal-Mart called for “shared responsibility” in the form of an “employer mandate which is fair and broad in coverage.” Wal-Mart, which for years was chastised as stingy when it came to employee benefits, has improved its benefits programs considerably. Still, the National Retail Federation, which vehemently opposes mandates for employers, said it was “flabbergasted” by Wal-Mart’s position.
It’s only been a relatively few decades since credit has become ubiquitous and necessary to modern life. I know people who have abandoned cash in much the same way they have given up their landlines — with nary a thought. That annoying commercial about how people who write checks stop the flow of happy commerce? Yeah, that’s how we live now.
But it’s not just about the convenience anymore. Try to book an airline flight without a credit card. Try to order anything online. Yeah, there’s PayPal, but just try to order something from Lands’ End using PayPal. Heck, try to get decent insurance rates without your credit score being taken into consideration.
So the fact that credit card companies are cutting people off, scaling back on perks like miles, raising interest rates, and reducing lines of credit isn’t just inconvenient, it’s putting consumers between a rock and a hard place. We like to think that using credit is about prudence and we scorn people who can’t handle their credit responsibly, but because credit has become so intertwined in the way we live, credit is a necessity, not a choice. Even good credit card customers, the ones who always pay their bills on time, are being penalized by credit card companies. (It’s hard to make money on people who are prudent about debt.)
The new credit card laws will help, but gone are the days of easy credit. I don’t know if that means a cash economy is going to come back. Will paying with folding money take on a sort of retro cool? I just think that before we throw out the baby with the bathwater we take a look at how commerce has organized itself around the ubiquity of credit cards and dust off the old systems of payment — do you know where your checkbook is? — before the whole thing grinds to a halt.
One last note — a local coffee house gives you a discount if you pay in cash. It’s like they are living in the past! It’s refreshing. And it makes me feel just a little bit virtuous when I pull out a few battered ones for my coffee and scone. That’s the kind of happy commerce I like, and it doesn’t stop the flow at all.
While the pace of retail bankruptcies appears to have slowed since the immediate aftermath of the disastrous 2008 holiday shopping season, retailers are still seeking Chapter 11 protection. The latest casualty to make its way to the Delaware bankruptcy court is outdoor-apparel seller Eddie Bauer Holdings (EBH), the parent company of the ailing Eddie Bauer retail chain and catalog/e-commerce operation. (The filing includes the Eddie Bauer chain of stores and other affiliates.)
EBH filed for bankruptcy yesterday (after days of speculation in the press that a Chapter 11 filing was imminent) and agreed to sell itself to the private equity firm CCMP Capital Advisors for about $202 million in cash. The selling price is considerably less than a $286 million 2007 offer to take the retailer private and reflects the deterioration of the company’s business and sour retail climate. Indeed, in its Chapter 11 filing EBH listed total debts of $426 million.
The company was founded by its namesake, a Washington native and outdoorsman credited with inventing the quilted down jacket after nearly freezing to death on a winter fishing trip. Bauer (1899-1986) opened Eddie Bauer’s Sport Shop in Seattle in 1920 and in 1942 launched the mail-order division. The business was later owned by catalog giant Spiegel, which filed for bankruptcy in 2003. In 2005 EBH rose from the ashes of the Spiegel reorganization saddled with a crushing debt burden.
The retailer struggled and was attempting a turnaround even before the recession — and consequent nosedive in consumer spending — drove it to seek court protection. New York-based CCMP Capital Advisors has said it will keep most of the chain’s 370 stores open for business during the sale process, but because the company is pursuing the sale under Section 363 of the Bankruptcy Code, other bidders may emerge. (If another bidder triumphs, CCMP will collect a $5 million breakup fee for its trouble.)
EBH chief executive Neil Fiske, in a statement issued yesterday, summed up his company’s predicament as such: good company, great brand, bad balance sheet. While he’ll get no argument here about the state of the company’s finances, I’m not willing to give Fiske a pass on the rest of the statement. While the Eddie Bauer name has considerable brand recognition (at least among those of a certain age), I think the company has lost its way in an increasingly crowded retail market. I receive email from the company almost every day and the merchandise looks pretty much like what you can buy from Lands’ End, L.L. Bean, and half a dozen other companies hawking t-shirts, swimsuits, and the like online. (The company did win me over a few years ago with a cherry red, quilted down jacket that can’t be beat!) Fiske acknowledges the need to return to the company’s outdoorsy roots. To that end, the retailer recently launched the First Ascent line of high-performance mountaineering apparel and gear, including backpacks, knives, and tents slated to be rolled out to 180 stores this fall. Also coming this fall (if the financial gods smile on the company) is Eddie Bauer’s heritage collection, which Fiske promises will revive the “old” although updated Eddie Bauer. Perhaps, but Eddie Bauer has a steep mountain to climb on its way back to retail viability.
Best Price Modern Wholesale opened for business Saturday in northern India’s Punjab Province. The big-box wholesale outlet is notable for several reasons. First and foremost, it represents the world’s largest retailer’s initial foray into the world’s second-most populous country. Next is size: While relatively modest by US standards, the 50,000-square-foot store is by far the largest commercial building in Amritsar (aka The city of the Golden Temple). As for the name, while descriptive it doesn’t exactly glide off the tongue.
The new store is run by Bharti Wal-Mart Private Limited, a 50-50 joint venture between the Indian conglomerate Bharti Enterprises and the Bentonville Behemoth, Wal-Mart Stores. Indian law prohibits foreign retailers from selling directly to consumers, so Best Price Modern Wholesale (BPMW) will sell produce, groceries and other staples, apparel, footwear, and other general merchandise to licensed merchants — including pushcart operators and small store owners — hospitals, hotels, restaurants, and other enterprises. (It will also serve retailers, such as Bharti Retail, which is setting up a chain of retail stores in India.) Patrons of BPMW must be registered members. Membership is free.
Following Saturday’s debut, which had been in the works for about two years, the joint venture expects to open 10 to 15 of the deep-discount cash-and-carry outlets across northern India by 2012. If all goes according to plan, establishing a pan-Indian presence will follow.
The Indian retail market is huge, fragmented, and undeveloped. It obviously presents a huge opportunity for Wal-Mart, which rings up about a quarter of its sales outside the US. The new venture will draw customers from the legions of pushcart operators who come to BPMW to stock their carts. Representatives from Bharti Wal-Mart have made it clear to local merchants that it intends to supply them, NOT compete with them. Indeed, Bharti Wal-Mart says it will enhance their businesses and profitability by providing access to quality products at low prices. (Sound familiar?) Wal-Mart, which already sources more than $1 billion worth of goods from India, is touting the expertise in supply chain management and logistics that it brings to the venture. Still, building a nationwide supply chain network in a country as vast and diverse as India will test even Wal-Mart’s mettle.