Friday, December 17, 2004

The War Comes to the Store

The WeatherPixie

I hate the war. The idea that my country is killing people who've done us no harm thousands of miles from our own shores absolutely disgusts me. We have no right to be in Iraq. We have no right to invade other countries.

Up till now, however, the war in Iraq is an idea that I've hated. It hasn't touched home. Except for the protests and how I felt after watching Fahrenheit 9/11, the war hasn't effected me personally. I don't know anyone over there. I don't think I even know anyone who knows anyone whose been over there. There's no rationing, or draft or any of the other trappings of war. Being a working class environment, the military recruiters come by the store from time to time, and a few months back, they convinced a guy named Robert to enlist. Robert worked in my store as the receiving/package-pick-up supervisor. He seemed like a mature, level headed guy, at least more mature than the average non-college-educated guy in his early twenties. He's been in the army for a month now, and he's totally changed. He came back to the store in full uniform today. I listened with disgust as he talked about how great the army is. He talked about how he'll sleep in his gear out in field, so "if any terrorists try attacking us, we'll be ready to roll out of bed and start blowing them away." (He said this!) More scary was how he talked about how much he loved his M-16. I mean he really meant it when he talked about how much he loved this piece of killing machinery.

More than ever, I'm convinced that the military seriously brainwashed the youth that enter into it. Its not job training anymore. Its about turning these poor kids into neo-con killing devices. This war won't be over anytime soon, and although Robert isn't actually a friend or anything, I feel like another Amercan young man has already been killed.

Wednesday, December 01, 2004


I woke up the other day to find the company I work for had been bought by another company. It was a strange feeling. After 118 years, Sears, Roebuck & Company was no more. I've been employed by Sears since 1992, so there was some trepidation as I read about the KMart-Sears merger.

I had a feeling Sears was looking for a buyer. The company sold off its credit division to Citigroup a year ago for 9 billion dollars. They own lots of prime real estate and the brandname value of Craftsman and Kenmore are tremendous assets as well. The stock price was floating along at about 40% less than its high 10 years ago. A brick & mortar store, Sears had shown an ability to adapt to new business modes, making the guy who built into a profitable and effective online store the CEO of the whole company a few years back. An underperforming business with all this cash & assets, they were prime for takeover.

Me at Sears

Who would have thought it would be K-Mart? I haven't shopped there in years, but we're talking K-Mart here. Possibly the only thing worse than buying something at K-Mart is being bought by K-Mart! Plus, the numbers didn't make sense. How does an organization doing 15 billion in sales volume with 850 big stores and 1400 total locations get bought out by an organization doing 10 billion in volume with fewer stores? How can a smaller company "buy" a bigger one? The offer values Sears at 11 billion dollars. What happened to the 9 billion we got for the credit division? I know some of that went to pay off some long term debt, but shouldn't Sears be worth more than $11 billion? I suppose thats the whole point. When a company's assets exceed the total value of their stock, they are ripe for corporate takeover. All it takes is a group with enough leverage to make an offer. Thats where Lampert comes in.
I suppose I should give my new boss the benefit of the doubt, but there's something scary about this guy. If he himself is not a billionaire by this point, he's well on his way to being one. As the manager of a fund, he resuced K-Mart from bankruptcy, sold off underperforming assets and made the company profitable again. By rolling the K-Mart and Sears entities together, there are tremendous opportunities for either growth or more stripping of assets. Whats scary is we don't know Lampert's real motives. Is he out to be the next Warren Buffet and building himself a tremendous fortune without regard to destruction he leaves in his wake? Will he destroy Sears for personal gain? Here's a short article about what Lampert might do next.

Of course, Sears was well on its way to destroying itself without needing any help from others. Sales had dropped every year since 2000 while competitors were posting increases. Sears had higher costs per sale than other retailers, although recent moves towards converting the stores towards more efficient operations were making headway. The company that was the nation's largest retailer a generation ago was now 7th on that list. By merging with K-Mart, we're back up to 3rd again. Home Depot is second, and we all know whose number one. The 900 pound gorilla named WalMart.

The 900 pound gorilla does whatever it wants, or so the old joke goes. WalMart is notorious for squeezing suppliers ruthlessly. I've never heard that about Sears or K-Mart. Reports exist that WalMart actually pressured manufacturers to move their operations out of the USA to reduce costs. WalMart is a force for outsourcing jobs overseas. I recognize that a global division of labor is inevidble and beneficial. Its better for the whole world that things be made efficiently, but we are in a competition here as well. Our economy competes with others as players in a larger global economy. I believe if we lose industry after industry to other parts of the world, we will eventually suffer. We must preserve the industries we still do well in. For example, appliances are mostly made in the USA. WalMart & BestBuy are now flooding their floors with Chinese made Haier and LG appliances. Sure, you can get a pretty nice looking LG for cheaper than its Whirlpool, Maytag or GE equivalent, but how long can these other companies keep making in the USA before their market share drain forces them overseas? Does WalMart care? Hell no.
Will Sears/K-Mart care? Maybe. Sears has understood that you gotta play nice with your suppliers because their health is realted to yours. The Sears/Whirlpool relationship typifies this attitude. I don't think Sears would ever pressure an appliance manufacturer to move their production overseas.

The 900 pound gorilla must be stopped. I'm now employed by a 600 pound gorilla. Lets hope the 600 pound gorilla behaves itself.