Barred by WalMart,Bangladesh suppliers feel left on the shelf

The reputational blow dealt to these businesses exposes a dilemma for multinationals since the April 24 collapse of a building outside Dhaka that killed 1,130 people,most of them low-paid seamstresses. Is it better to sever ties with long-time suppliers that may pose a safety risk,or stay and try to lift standards?

8220;What Wal-Mart is doing at the moment is nothing but saving its own skin. As a responsible business partner they should stay with us and help improve working conditions for the safety and security of workers,8221; said Reaz Bin Mahmood,a vice president of the Bangladesh Garment Manufacturers and Exporters Association. 8220;For so long they made huge profits. Now the time has come to join friendly hands with us.8221;

Simco8217;s four factories appeared on Wal-Mart8217;s list even though they had never failed a safety audit in 22 years of supplying the world8217;s biggest retailer.

Wal-Mart said Simco was banned for unauthorized sub-contracting of an order to a factory called Tazreen Fashions where 112 workers died in a fire last year.

Simco said it had subcontracted to Tuba Garments Ltd,which was an authorized Wal-Mart supplier at the time,but Tuba then shifted the order from its mother factory to Tazreen. Tuba8217;s managing director,Delowar Hossain,confirmed in a letter he gave Siddique to show Wal-Mart that his company had diverted the work to Tazreen without Simco8217;s knowledge.

Simco says it is being unfairly punished for that lapse.

8220;This is 8230; like the parable of the boy who was throwing stones at a frog not realizing what was a game for him was death for the frog,8221; said Siddique,adding that Simco was considering taking legal action against Wal-Mart for 8220;besmirching8221; the company8217;s good name.

Wal-Mart,which stepped up factory inspections in response to the series of deadly accidents,said it was not seeking to influence the business decisions of any other companies. But several retailers and brands,including Spain8217;s Inditex SA,owner of the apparel chain Zara,told Reuters they had followed up with their own checks of named factories.

Not all buyers have barred factories on the 8220;red8221; list. Reuters found last month that an unapproved factory where Wal-Mart and Inditex inspectors had spotted cracks in the wall was still making Wrangler shirts for the world8217;s largest apparel maker,U.S.-based VF Corp.

VF Corp told Reuters its philosophy was to stay and try to improve working conditions.

8220;We believe this provides the necessary balance between providing needed jobs and safeguarding employees,8221; VF said in an emailed statement to Reuters.

8216;QUESTIONED RELENTLESSLY8217;

A poor South Asian country,Bangladesh relies on garments for 80 percent of its exports. Thanks to cheap labor and a capacity to handle high-volume orders,its industry has enjoyed a long boom and the country is now second to China in the global ranking of apparel exporters.

Wal-Mart takes more than 10 percent of Bangladesh8217;s garment exports currently worth 19 billion a year,according to officials at the BGMEA industry association,a share that gives it both clout and influence.

Its Bangladesh operations have become a bigger issue for shareholders since the deadly building collapse in April,even though it did not use any of the suppliers based in the complex. Wal-Mart hosts its annual meeting in its home state of Arkansas on Friday,and a group of employees and activists raised 8,700 to bring two former factory workers from Bangladesh to help call attention to labor practices.

Wal-Mart has been the most aggressive in spotlighting substandard suppliers. In addition to the 8220;red8221; list published on its ethical sourcing website,it issued a press release calling on the Bangladesh government to suspend some factories where it found safety problems. But it has somewhat softened its stance after some factory owners raised objections.

It changed the wording on its website to specify that unauthorized subcontracting was grounds for inclusion on the list. When asked whether this was in response to Simco8217;s concerns,Wal-Mart said only that it had updated the language to add 8220;greater clarity8221; on the types of violations represented on the list.

It removed the names of about 100 factories that had been banned before January 2011,and said it would list unauthorized suppliers on the website for a period of only 24 months,8221;recognizing that facilities and practices can change over time.8221; It also added an email address where factory owners could lodge complaints if they felt they were named in error.

One of the names removed was Garments Export Village Ltd. Chairman A.K.M. Badiul Alam said he had decided in 2007 to stop supplying Wal-Mart and since then the retailer had never conducted a safety audit of his operations.

8220;We have been questioned by our international community and all stakeholders relentlessly,and our goodwill and image are in threat,8221; Alam wrote to the industry association,objecting to his company8217;s inclusion on the initial list.

ORDERS HALVED

Last month,Siddique was stunned to learn that an order he received to make pajamas for J.C. Penney had been canceled. The news came in an email from the U.S. chain8217;s Chinese supplier,Wuxi Jin Mao Co Ltd,which said Penney was following Wal-Mart8217;s unapproved factory list.

8220;Normally the big retailers in U.S. share such information with each other,8221; Yang Nan,an executive at Wuxi Jin Mao,wrote in the email. 8220;JCP,Target,etc will follow Walmart8217;s unapproved fty factory list this time,and suspend these 245 ftys in Bangladesh for now.8221;

Officials at Wuxi Jin Mao declined to comment.

Penney confirmed that it had suspended Simco as a supplier 8211; for reasons it would not make public 8211; but said that decision was taken before it even knew a Wal-Mart register existed.

8220;To our knowledge,the company Penney has never issued a directive to follow Wal-Mart8217;s suspension list. In fact,we were not aware of the Wal-Mart list until they posted it online,8221; Penney spokeswoman Daphne Avila told Reuters by e-mail.

U.S. discount retailer Target Corp also denied that it was following the Wal-Mart list.

Simco,which in an ordinary year shipped 12 million to 15 million worth of apparel,has seen its business dwindle to about half of what it was six months ago. Siddique said the company had about 1,500 workers at its peak but now employs just 600 and is on the verge of a complete shutdown.

He and others in Bangladesh say they want Wal-Mart to name the suppliers they continue to use rather than those they don8217;t.

8220;We do not want to work for Walmart in future,8221; he wrote in a cease-and-desist letter to Wal-Mart dated May 17. 8220;But your putting us on this list and implying it is because of so-called 8216;electrical,fire,and building safety8217; issues is not only a false misrepresentation but will cause us serious financial damage,because our other customers,American or otherwise,are following this list.8221;