A Chinese Factory Fighting Back?


A toy company was recently being held up as an example of how well initiatives to bring manufacturing jobs back to the U.S. were working. They were sourcing their goods from China, as so many new companies now do, and they were planning to transition to American-made goods over the course of a year or two.

They got support from Walmart, a great PR push, and a a spanking new factory with a few dozen American workers. They had their plans laid and it looked as though it would be a success.

Then the Chinese factory which made their goods pulled an end run.

Instead of honoring the deal they had made for payment to be due 60 days after delivery to retailers, they insisted on full payment before releasing the goods. The toys were held up in transit, a very expensive place to be, and extra costs soon outpaced the new company’s ability to pay. Unable either to pay for the toys and get them off the docks or to pay the fees to keep them safe on the docks, the company was looking at losing their entire shipment of Christmas toys right before they got them into the stores.

The plot thickens. The Chinese factory got a meeting with Walmart buyers and offered to supply the toys in place of the toy company. Having changed the terms of the deal and kept the toys, they were prepared to sell them directly to the retailer.

This is the story the toy company is telling, and they are suing the factory. We have not heard the factory’s side of the story. However, the toy company laid off most of the workers and is looking at dismal failure.

Will offshore factories retaliate against manufacturers trying to reshore their production? It’s too early to say whether that’s what’s happening here, but it’s an interesting question.

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