Will Wal-Mart Answer Its Wakeup Call?

Wednesday, August 17, 2005

Will Wal-Mart Answer Its Wakeup Call?

Last year, Thomas Frank wrote a book about it -- individual citizens who vote contrary to their economic self-interests. But what about big business? Wal-Mart executives have certainly received some advantages from supporting George W. Bush and other conservatives. But are conservative positions always benefiting business' bottom line? I don't think so.

Consider what Wal-Mart is facing:
While Wal-Mart Stores blamed higher gas prices for cutting into its sales in the second quarter, CEO Lee Scott said Tuesday he's concerned that the worst may be yet to come.

"I do feel good about the economy, but I worry about the effect of higher oil prices," Scott said ... Wal-Mart stock was down over three percent on the New York Stock Exchange.

Tom Schoewe, Wal-Mart's chief financial officer, chimed in during the call, adding that Wal-Mart was hit with a double-whammy because of the escalating price of fuel.

On one hand, higher gas prices will continue to cut into the pocketbooks of Wal-Mart's predominantly low-to-mid-income customers .... At the same time, Schoewe said more expensive fuel was costing Wal-Mart more on the back end of the business, primarily to use its vast trucking fleet to move freight around the country to its stores.

"This impacted our operating profit by $30 million and our total utility expense rose by $100 million in the quarter," Schoewe said.
But the Bush administration's position is grounded in the status quo: just keep drilling until we find more oil.

That's a delusional policy. If Wal-Mart supported policies that raised CAFE standards for motor vehicles (opposed by Bush) and if the company supported or simply pursued on its own liquified natural gas (LNG) -- which is gaining in popularity among European consumers -- the company would likely see its costs decline.

But can Wal-Mart recognize that conservatives' positions may not always be in the company's best interests? Can Wal-Mart rise above its ideological straight-jacket enough to champion legislation that encourages LNG production, raises tax incentives for hybrid vehicles and supports alternative fuels in other ways?

Sadly, I doubt it.

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