How safe are Wal-Mart's factories?

A deadly fire at a Bangladesh factory that produced clothing for the company sheds light on the dangerous working conditions suppliers can face.

By Jonathan Berr Dec 5, 2012 2:54PM
Wal-Mart store in Secaucus, New Jersey / Jin Lee/Bloomberg via Getty ImagesUpdated 3:50 p.m. ET

Wal-Mart
(WMT), which has been dogged this year by allegations of bribing foreign officials, now stands accused of putting profits above worker safety before last month's deadly fire at a garment factory in Bangladesh.

According to Bloomberg News, Wal-Mart rejected an industry proposal in 2011 that would require retailers to pay to help suppliers in Bangladesh upgrade factories. Wal-Mart dismissed the idea as being impractical, arguing "we are talking about 4,500 factories, and in most cases very extensive and costly modifications would need to be undertaken to some factories," according to minutes from a retailer meeting obtained by Bloomberg News.

More than 100 people died last month in a fire at a Bangladesh factory that produced apparel for Wal-Mart, Walt Disney (DIS) and Sears Holdings (SHLD). All three companies have distanced themselves from the factory, however, saying the work there was done without approval. Wal-Mart said it knew of safety issues at the factory before the fire and decided to stop doing business there, the Associated Press reports.

"The fire incident is indeed tragic and unfortunate," said Shafiqul Islam, a counselor at the Bangladesh Embassy in Washington D.C., in an email to MSN Money. "However, to prevent such incidents in future, numerous actions are being taken by the government as well as the industry. We hope things will be much better in the coming days."

The timing of these accusations as Wal-Mart heads into the busy holiday season could not be worse. Wal-Mart is facing increased scrutiny over the way it treats its employees, and unions are making their biggest push to organize the chain in years. Consumers may start to wonder about the real cost of Wal-Mart's low prices.

Shares of Wal-Mart, which have surged almost 27% in the past year, were flat Wednesday. A company spokesperson could not be reached for comment on the report.

The Bloomberg report raises the possibility that Wal-Mart may be sued under the Alien Tort Claims Act, a law that activists have used to target U.S. companies for their actions overseas. Coca-Cola (KO), Ford (F) and Unocal (UCL) are among the companies that have been sued under the law. These cases tend to linger for years and have the potential to be costly. 

Bangladesh, the second-largest garment exporter behind China, is one of the poorest countries in the world. According to the CIA World Factbook, more than 30% of the country's population lives below the poverty line. The garment industry is one of the few avenues that offer people any hope of steady employment. These jobs are coveted, even though more than 700 workers have died in fires at Bangladesh since 2005.

Media reports about the Nov. 24 fire paint a horrific picture of conditions the Tazreen Fashion Ltd factory, located near Bangladesh's capital city of Dhaka. The owner of the facility wasn't aware that it lacked fire exits, according to the Associated Press. Workers who were unable to escape from the flames were burned alive. Others jumped to their deaths. The fire was apparently caused by an electric short circuit, a common problem, according to the International Labor Rights Forum. The Tazreen tragedy proves that voluntary efforts to ensure worker safety in the garment industry have failed, the group said.

Victims of the fire are receiving compensation, according to the Daily Star, an English language paper in Bangladesh. The government there seems to think that factory fires may be the work of arsonists. "The prime minister called upon all to help hunt down those instigating workers to set fire to garment factories," the paper says.  The basis of these suspicions is unclear.

--Jonathan Berr does not own shares of the listed stocks.  Follow him on Twitter@jdberr.

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17Comments
Dec 6, 2012 11:56PM
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Hi, only 10% of Americans are in unions, there  are hurting , they need Wal-Marts 2 million workers, its not that they want to help ,  it is they want the union dews, I  heard from a Hostess worker who told me that she  did not want  to strike because the company said they would close the company, BUT the union made them go on strike, and she lost her job, I would rather have a job ! 
Dec 6, 2012 4:02PM
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Boycotting these stores such as Wal-Mart is a good idea but so many people have become deppendent on these stores for their inexpensive foreign made products simply because peoples wages in America have become stagnant and for many of those who are working, many are not making much more than minimum wage.Thats the reality that exists in America today! I don't think these people are shopping in high end stores and even their products are made in third world countries but cost more for the consumer to buy just because of the store's fancy name.Try to find anything made in the USA its a real challenge! I blame the public servants WE THE PEOPLE elected into office in the past they have set the stage for this to happen for their and a very few others own bennefit and not what is best for the good hard working people of the USA.
Dec 6, 2012 3:25PM
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Considering the fire at Tazreen Fashion Ltd's factory was practically a repeat of the Triangle Shirtwaist Co. fire in New York a little over a century ago...are the management of these companies ignorant?, illiterate?...
Dec 6, 2012 3:22PM
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I do my best to buy only things made in the USA.  I now sew most of my own clothes with fabric that is made in the USA..At least I know what the working conditions are.  I also only buy produce from local farmers in my area.  It's a small step and I don't mind paying more for things that are made and grown in the USA.  Keep our hard earned dollars local.
Dec 6, 2012 3:20PM
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The only way jobs will come back to the US is a drastic reduction in the costs of living and lifestyle changes, until those things are addressed bye bye manufacturing, pretty much bye bye everything.

Cost of living - In these foreign countries the avg home doesn't cost $300k. Cost increases just lead to a vicious circle of never ending increases till it collapses.

Lifestyle changes - In these foreign countries a stigma isn't placed on multi-generational house holds. You only have so much dirt to play on and anything new takes millions of years to create.

Even if those things are addressed, what factories were here are so obsolete they would have to be replaced.
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If a company moves it operations overseas, it should lose its US market. If the people of the USA would not buy unless the product was made in the USA, you may be suprised how quick most companys would move back to the USA!!!!!!!!!!!!!!!!!!
Dec 6, 2012 1:32PM
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Corporate greed is nothing new. It has been going on for many, many years. The problem stems from vast expansion. Wal-Mart is a perfect example. When companies get THAT BIG, it is because the more money they make, the more money they (companies) can afford to expand. CEOs and other top Company Executives grow even hungrier for higher profits, bigger bonuses and more power. Labor costs always make the people at the top of the pyramid cringe. Minimal annual pay raises are set in place for even the most loyal employees. These greedy money magnets will stop at nothing to maintain or improve their companies historical profit margins. While these people sip expensive and exotic cocktails on the beaches of Tahiti, their desperate and dedicated workers are scraping for basic necessities. When employees cannot afford health insurance offered by the very company who employed them, the wages are simply too f****** low. PERIOD!!!
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The buyers of goods from these factories are not responsible for   their maintanance or safety, the owners are!
Dec 6, 2012 1:20PM
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If anyone wants to partake in a "Boycott" all you have to do is not purchase products from Wal-Mart or any other retailer that has it's products manufactured outside the United States. It's a tough decision, pay less to those who have products imported for U.S. sales or pay more to small businesses that keep the circulation in the U.S. economy. Us as individuals are the only one's who can try to reformat the balance. Don't scratch your head wondering what happened to your job/career if you get laid off or go out of business when you want to save a couple bucks. At the same time this would be a remedy for all the under paid adults and children across the world that are unfortunately working in the "Sweat Shop" factories. Then we would not burden ourselves with these thoughts and articles due to our own selfishness and greed trying to find savings...
Dec 6, 2012 1:08PM
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I just love the American public and media. Every time there is some human disaster in a 3rd world factory you all get up in arm's about how could this happen. Well look in the mirror next time it is your desire for cheap products that have ruined this countries economy and created the situations where children and adults are being put at risk working in sub standard 3rd world crap holes. be willing to pay a little more for an American made product if you really care, don't shop at stores like Wal-Mart which everyone knows seeks out the lowest bidder for products mostly made over seas, educate yourselves when shopping read the labels on your clothing, foods, and other items you are buying to see the country of origin. Buy American even if it is a little more and help save your own future and maybe save some works life's overseas to.
Dec 6, 2012 12:59PM
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We need to find a way to bring the jobs back to America. After the huge amount of unsafe products coming from overseas markets (from dry wall, to baby formula, to dog food), could we pass a STRONG law that denies a company its right to sell its products in our markets if: They do not follow our EPA rules and regulations, follow our OSHA safety rules, follow our child labor laws, food inspection and regulation, and all the other regulations companies in America have to follow. Doesn’t matter where the factory is in the world, it wouldn’t be a tariff. For the health, safety, and welfare of our citizens, you will not be allowed to sell in America. We wouldn’t be telling other governments how to run their manufacturing sector. If they want to let companies manufacture crappy and dangerous things fine, sell them in China, let the Chinese government protect its citizens. If the company doesn’t follow our rules (not the government of the country the company is in) you will not be allowed access to the American markets. It might not be so profitable to take a company overseas to take advantage of a corrupt or weak government just to escape our manufacturing laws to, sicken, injure, pollute, work children, and kill the local populace for pennies a day just to make more money. (Bhopal India disaster, Bangladesh textile fire). This might offset the shipping costs to get their products to America and make it cheaper to manufacture here again.  We would also be doing the world a great service.

Dec 6, 2012 12:45PM
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So in addition to the high taxes that are facing American's, you're also attacking the companies that are doing their best to reduce those costs that American's face.  In areas that enjoyed the growth of exportation in China, property values pushed up by those factories that are located in those cities, and locals enjoy more asset wealth than many Americans.  Shanghai citizens own 4-6 houses valued at over $200,000USD, and you still preach about below poverty lines.  The same citizens make less than $200 a month, but have asset wealth far beyond most American's.  Before you go around trying to help everyone, why not help our own first.  With Ultra-inflation due to unrealistic increase in any input in the supply chain, you will push US into recession the likes we probably have never seen.  
Dec 6, 2012 12:43PM
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I don't shop at WAL-MART. A "BOYCOTT" movement would do us ALL justice in the long run.
Dec 6, 2012 12:23PM
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greed, greed and more greed will do it everytime.
Dec 6, 2012 12:01PM
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This is not a problem with capitalism but with unregulated capitalism.   There needs to be a visible hand to guide the invisible hand and ensure that corporations are limited from behaving poorly in order to gain more profit.
Dec 6, 2012 11:48AM
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And some of the far far right want to do away with regulations in the usa,  to get jobs back...history has some horror stories of factory fires (early 1900's,  late 1800's),  substandard merchandise,  etc...admit their are over regulation,  and the union and managment are sometimes to blame for job loses.  But it is all corportate greed,  rather pay some third world to make 200 hundred dollars sneakers,  that cost maybe 5 bucks,  then to try to pay a american worker at least a decent wage,  but then the obscene profits would go down
Dec 5, 2012 8:25PM
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as long as capitalism exists there will be sub-standard factories in some 3rd world country, which at some point may be the USA.  if the unions get into Walmart some will think thisnis great but the same sub-standard factories will make the products while union members get paid more to put them on the shelf. 
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