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Wal-Mart Chief Defends Closing Unionized Store

Scott Says Labor Costs Guided Quebec Decision

By Michael Barbaro
Washington Post Staff Writer
Friday, February 11, 2005; Page E01

The chief executive of Wal-Mart Stores Inc. yesterday defended the retailer's decision to close a Canadian store after its employees voted to form a union, saying demands from negotiators would have forced an already unprofitable store to hire 30 more people and abide by inefficient work rules.

"You can't take a store that is a struggling store anyway and add a bunch of people and a bunch of work rules that cause you to even be in worse shape," H. Lee Scott Jr. said.

In his first interview since Wal-Mart announced it would close the store in Jonquiere, Quebec, Scott said Wal-Mart saw no upside to the higher labor costs and refused to cede ground to the union for the sake of being "altruistic."

"It doesn't work that way," he said.

Wal-Mart's decision has infuriated the United Food and Commercial Workers union, which was negotiating a contract for the Quebec store's 190 employees. If it had succeeded, the store would have become the only Wal-Mart store in North America with a union contract.

"Wal-Mart is trying to send a message to the rest of their employees that if they join a union the same thing could happen to them," said Michael J. Fraser, the union's national director in Canada. Fraser said the union plans to file unfair labor practice charges against the chain with the Quebec Labor Relations Commission.

In a 90-minute discussion with Washington Post reporters and editors, Scott said Wal-Mart's strategy for growth is to be "everywhere we are not." In the United States, that means edging closer to major cities, such as Los Angeles, New York and Washington, where the chain is likely to find less land, higher costs and stiffer resistance from labor unions and neighborhood activists.

Wal-Mart abandoned plans in August for its first store in the District because the chosen site in the Brentwood neighborhood of Northeast proved to be too small. But it has expressed keen interest in building a store in the city.

Scott characterized the performance of the chain's handful of urban U.S. stores as "okay" and said its failure to win approval for stores on the South Side of Chicago and Inglewood, Calif., last year received an inordinate amount of attention, given that Wal-Mart opens as many as 60 U.S. stores a month. Nevertheless, he said, the chain made a strategic error in Inglewood when it attempted to circumvent what it expected to be an unfavorable city council vote on a new store by seeking a voter referendum instead.

"In doing that, I think we came across as a bully who would get their way regardless," Scott said. "Our size causes us, when we do something inappropriate, which is usually done out of stupidity, to come across as being done out of arrogance. And people just won't stand arrogance."

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