Full disclosure. Readers here know I own Wal-Mart (WMT) shares.
Now the news (from the WSJ):
In a major break with most other large companies, Wal-Mart Stores Inc. Tuesday told the White House that it supports requiring employers to provide health insurance to workers, a centerpiece of President Barack Obama’s effort to provide near-universal coverage to Americans.
The support of Wal-Mart, the nation’s largest private employer, could give momentum to one of the most-contentious aspects of legislation taking shape in Congress to fix the health system. To help pay for covering the 46 million uninsured, lawmakers have proposed mandating that all but small employers provide insurance for workers or help pay for it.
Lobbies for large corporations have opposed the idea. The U.S. Chamber of Commerce has fought such a mandate, saying it would prompt companies to cut jobs, lower wages and possibly drive them out of business. Wal-Mart — which provides insurance to employees and wants to level the playing field with companies that don’t — on Tuesday delivered a letter to President Obama taking a different stance.
“We are for an employer mandate which is fair and broad in its coverage,” said the letter, signed by Wal-Mart Chief Executive Mike Duke. Andrew Stern, president of the Service Employees International Union, also signed the letter, along with John Podesta, who led President Obama’s transition team and is chief executive of the Center for American Progress, a liberal-leaning think tank.
Why? It seems to run counter to Wal-Mart “we’ll do what we think is right” approach.
Wal-Mart provides health care to it employees. Much of the competition does not. Should they then be required to, their cost basis for their business suddenly rises…considerably. Should that happen, in order to offset their new cost increases two things must happen. Either they offset it with pay freezes or reductions for new hires OR increase their prices to consumers.
Either scenario aids Wal-Mart immensely as it slows growth in their payroll and/or increases their competitive price advantage over the competition.
I like Wal-Mart and I shop there quite a bit. Just lets not read anything into this like a sudden altruistic bent or support for the current administration’s policies. It is as simple as “whatever hurts your competition helps you”.
As Micheal Corleone was fond of saying…. “It’s just business”.
Disclosure (“none” means no position):Long WMT