Chinese Strikes Hit Walmart, Coca-Cola and Sony Where It Hurts

 | Nov 26, 2016 | 6:00 PM EST
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Workers of the world, unite! 

That exhortation from the Communist Manifesto might not be going down too well in China right now.

A series of strikes has brought together workers in an unusual show of strength, often united by social media. While the Chinese government has cracked down on incidents of unrest in the past, whether over labor conditions or social issues, they appear uncertain what to do this time around. 

That's largely because the biggest target is as American as it can get -- Walmart Stores (WMT) . Karl Marx and Friedrich Engels would be proud, as up to 20,000 employees, about one-fifth of the company's work force, have joined up on WeChat, the most-popular messaging app in China, to complain and moan about work.

They've actually urged, "Workers, stand up!" at demonstrations, according to this story from The New York Times. The Communist Party forced Walmart, such an opponent of unions in other countries, to accept a Communist-controlled union for its workers. But those in the dispute have been bypassing it. They have appealed directly to local officials and the public in a bid to press the company to roll back changes in company policy that they dislike.

Sony (SNE) also faces a major strike at its factory in Guangzhou -- the capital of Guangdong province, which borders Hong Kong. The potential strike action comes after the electronics company opted to sell the plant to a Chinese company for around $95 million.

Coca-Cola (KO) has experienced a similar situation after it agreed to sell all of its bottling operations in China to the Hong Kong conglomerate Swire Pacific (SWRAY) and the state-owned food giant Cofco. Although Cofco itself is not listed, it has four listed subsidiaries in Hong Kong and three in the mainland. Swire says it is paying $850 million, but it's not clear what Cofco is chipping in.

Workers at Neutrogena (NGNA) stores and state-owned mobile-phone operator China Unicom (CHL) have also organized online or via social media, escaping any significant response from the government. Last year, China Labour Bulletin reports, there were 2,774 strikes or labor protests in China -- more than the previous four years combined.

Walmart faces the greatest challenge. The retailer opened its first store in the country in 1996, in Shenzhen, and has since expanded to the point that it has more than 400 stores across China. Protestors in one region have managed to link up with those in other parts of the country, thanks to social media.

Eli Friedman said in the Times story that this is "probably the most substantive example of sustained, cross-workplace, independent worker organizing we have seen in China's private sector."

The biggest beef that the workers have with management is a change to the scheduling system that the company implemented this summer. The company says it gives workers more flexibility, but the employees say it actually cuts their overtime wages and creates shifts that are too long. Some employees have complained at being forced to sign on to the new policy, and others say they've been denied wages or promotions after complaining to their boss.

There's no doubt that the widespread unrest has left the Chinese authorities in a quandary. Although they work hard to avoid any social unrest that might ultimately undermine their authority, they are also loath to take the side of an American company in a labor dispute. That's particularly true when one way they have kept the populace happy is by touting their protection of the rights of the "working man."

Some of the authorities may even theoretically support the strikers, since they are counterbalancing the rising influence of foreign companies in China. So for now, local and national officials have sat back and let the situation unfurl. Although the police took action at the Sony strike, they have not shut it down -- only preventing the workers from disrupting the entire business. 

The Sony factory employs around 4,000 people, who will get to keep their jobs under the new owners. But workers started blocking the entrance to the factory on Nov. 10, preventing shipments from leaving. The police broke up that blockade five days later.

Employees have continued to demonstrate and skip work, though, hanging around in the grounds or the canteen, as explained in this story from the Nikkei Asian Review.

Although the employees at the ex-Sony factory and Coca-Cola's bottling operations are keeping their jobs, they are attempting to hold their former employers to ransom. Emboldened by the success of workers elsewhere, they are demanding compensation for being "sold like slaves."

The companies have in fact done nothing wrong, and owe the employees nothing. But more often than not, companies in similar situations have bought the workers off in the end, just to avoid further disruption and embarrassment.

It's worth watching to see if a demonstration gets truly out of hand, to the point where it freezes China operations -- particularly as the market is an increasingly important source of revenue for some companies, and frequently an expensive and difficult market for international companies to enter.

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