Why the idea of modern-day capitalists as "job creators" is bullshit
From Naomi Klein's book "No Logo":Consider the case of Sara Lee Corp., an old-style conglomerate that encompasses not only its frozen-food namesake but also such "unintegrated" brands as Hanes underwear, Wonderbra, Coach leather goods, Champion sports apparel, Kiwi shoe polish and Ball Park Franks. Despite the fact that Sara Lee enjoyed solid growth, healthy profits, good stock return and no debt, by the mid-nineties Wall Street had become disenchanted with the company and was undervaluing its stock. Its profits had risen 10 percent in the 1996-97 fiscal year, hitting $1 billion, but Wall Street, as we have seen, is guided by spiritual goals as well as economic ones. And Sara Lee, driven by the corporeal stuff of real-world products, as opposed to the sleek ideas of brand identity, was simply out of economic fashion. "Lumpy-object purveyors," as (business management author) Tom Peters would say.
To correct the situation, in September 1997 the company announced a $1.6 billion restructuring plan to get out of the "stuff" business by purging its manufacturing base. Thirteen of its factories, beginning with yarn and textile plants, would be sold to contractors who would become Sara Lee's suppliers. The company would be able to dip into the money saved to double its ad spending. "It's passe for us to be as vertically integrated as we were," explained Sara Lee CEO John H. Bryan. Wall Street and the business press loved the new marketing-driven Sara Lee, rewarding the company with a 15 percent jump in stock price and flattering profiles of its bold and imaginative CEO. "Bryan's shift away from manufacturing to focus on brand marketing recognizes that the future belongs to companies-- like Coca-Cola Co.-- that own little but sell much," enthused one article in Business Week. Even more telling was the analogy chosen by Crain's Chicago Business: "Sara Lee's goal is to become more like Oregon-based Nike Inc., which outsources its manufacturing and focuses primarily on product development and brand management."
To correct the situation, in September 1997 the company announced a $1.6 billion restructuring plan to get out of the "stuff" business by purging its manufacturing base. Thirteen of its factories, beginning with yarn and textile plants, would be sold to contractors who would become Sara Lee's suppliers. The company would be able to dip into the money saved to double its ad spending. "It's passe for us to be as vertically integrated as we were," explained Sara Lee CEO John H. Bryan. Wall Street and the business press loved the new marketing-driven Sara Lee, rewarding the company with a 15 percent jump in stock price and flattering profiles of its bold and imaginative CEO. "Bryan's shift away from manufacturing to focus on brand marketing recognizes that the future belongs to companies-- like Coca-Cola Co.-- that own little but sell much," enthused one article in Business Week. Even more telling was the analogy chosen by Crain's Chicago Business: "Sara Lee's goal is to become more like Oregon-based Nike Inc., which outsources its manufacturing and focuses primarily on product development and brand management."
Cutting jobs raises stock prices. The only motivation of the piranhas is to raise stock prices.
posted by CM @ 6:54 PM
1 Comments:
Just an observation here - no where in that book excerpt does it say jobs were lost. It just says they sold their factories to other companies and those companies then became suppliers to Sara Lee. It's possible those other companies kept those factories and work forces in place.
This argument is a little tired anyways. More manufacturing jobs are now being brought back into the US/Mexico because Asian wages have risen materially and transportation costs (high fuel) and time mitigate the cost advantage of producing overseas.
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