Mel Redman
Fourteen of the 24 workers hired to manufacture battery-powered toy cars in Rogers were laid off suddenly on Friday, and the high-profile company that was granted $2 million by the state to start up the manufacturing operation filed a $20 million lawsuit in federal court against the Chinese company that had previously produced the toys.
Mel Redman, CEO of Redman & Associates, said in a statement delivered to Arkansas Business on Friday afternoon that Chinese importer Sales Chief Ent. (Hong Kong) Co. engaged in an “underhanded strategy” in an attempt to disrupt Wal-Mart Stores Inc.’s initiative to bring manufacturing jobs back to the United States.
R&A alleged in its lawsuit that Ellen Liu, executive director of Sales Chief, “made clear her intention to derail the Made in USA initiative” in a meeting with Redman & Associates officials earlier this year.
The written statement said 24 employees had been laid off, but Redman later told Arkansas Business that only 14 got pink slips on Friday.
Mel Redman’s business history and the state government’s faith in his ability to produce the toy cars for Wal-Mart is the subject of a report that appears in the Sept. 8 issue of Arkansas Business. It is being released early online in light of Friday’s developments.
“I’m disappointed,” Grant Tennille, executive director of the Arkansas Economic Development Commission, said Friday. “I hope there is some way to resolve this. It is interesting – this is the first time I’ve seen a Chinese company retaliating against the Made in USA initiative.
“This is China saying to Wal-Mart, ‘We don’t like one of your initiatives and we’re going to stomp on it.'”
Specifically, according to Redman & Associates, Sales Chief demanded up-front payment for all toys that were to be shipped to the United States for sale in Walmart stores, “including goods already booked and shipped,” the statement said. “This effectively stopped the flow of the goods to Wal-Mart shelves at a critical time for the large holiday order.”
Redman said it would cost about $10 million to meet Sales Chief’s demand for immediate payment for products currently spread out between Chinese warehouses, ships in transit and the port at Long Beach, California.
R&A said Sales Chief agreed to cooperate with previous agreements through 2014 after Redman’s manufacturing agreement with Wal-Mart became public in October 2013. R&A, through its Nuvzn Technologies LLC, planned to manufacture 100,000 of the estimated 600,000 annual order of 6-volt toy cars in 2014 through a partnership with Bentonville Plastics while the balance of production continued to be handled by Sales Chief.
Redman & Associates said it sold 1.1 million units of 6-volt and 12-volt cars in 2013 that were manufactured by Sales Chief.
Nuvzn, pronounced “new vision,” laid off 14 full- and part-time employees on Friday. R&A said its “current inventory and future sales projections” should allow it to honor its financial obligations to lenders and to the state government.
The AEDC approved a $2 million grant to Nuvzn to help pay for the molds and assembling equipment. The state has already given Nuvzn approximately half of the money, and Tennille said Mel Redman would be personally responsible for repaying the money if the venture didn’t fulfill its goals.
“We were informed that our company was the talk of China, and not in a good way,” Redman said in the statement. “Our supplier’s unexpected departure from years of business dealings hurt the supply of goods to Wal-Mart. Unfortunately for the people of Arkansas, and especially our associates and their families, their underhanded strategy worked.”
Between March 2012 and April of this year, Redman & Associates purchased and paid for more than $50 million in goods from Sales Chief on “reasonable” terms in which payment was due 60 days after shipment from China. But in May, according to the statement, the Chinese company “abruptly” demanded prepayment.
In-person talks with Liu, the Sales Chief representative, this week broke down, Mel Redman said. Liu was unmoved by the news that 14 people lost their jobs, he said.
Redman & Associates filed its 20-page complaint in U.S. District Court in Fayetteville shortly after noon on Friday. R&A told Arkansas Business, and claimed in the lawsuit, that Sales Chief tried repeatedly to arrange a meeting with Wal-Mart officials to cut them out as a vendor, but Wal-Mart alerted Mel Redman, who attended a meeting Thursday.
Sales Chief, according to the lawsuit, met again with Wal-Mart without any Redman representation Friday and attempted to reach an agreement to sell the products to Wal-Mart without Redman & Associates as broker.
The lawsuit, filed by Fayetteville attorney Mark Henry, accuses Sales Chief of “changing the credit terms and disrupting the flow of goods at a critical point” during the seasonal sales cycle specifically “to make an example of R&A, with the larger goal of forestalling Wal-Mart’s on-shoring efforts before they get off the ground.”
R&A also accuses Sales Chief of interfering with its existing business relationship with Wal-Mart.
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