Ambassador Marine, a California-based provider of faucets, sinks and other marine accessories, has blamed West Marine for its financial woes. The company filed for Chapter 11 bankruptcy protection on June 5, following a three-year recall of thousands of bicycles it sold to West Marine over a 10-year period.
West Marine, by contrast, says that Ambassador’s bicycles prompted a nationwide recall that has cost it hundreds of thousands of dollars.
In a June 1 letter to clients and suppliers, Ambassador president Scott Spiegel wrote that the recall of bicycles it supplied to West Marine under a private label agreement, and a subsequent lawsuit filed by West Marine to recoup its costs, have had a “materially adverse effect” on the company’s ability to operate, so it filed for Chapter 11 protection. “The company is not in a position to continue operating in the ordinary course and bear the enormous expense associated with defending against these disputed claims,” wrote Spiegel.
Ambassador listed West Marine as its largest unsecured creditor in the Chapter 11 filing, with debts of US$450,000.
Spiegel said in his letter that the national recall of thousands of bicycles was too extreme, noting that a “more limited” recall would have been preferable. “Three bicycles had cracked frames due to welding failures (without injury),” wrote Spiegel. “West Marine notified the US Consumer Protection Agency, requesting a massive, overbroad recall despite the fact that a more limited and focused recall was feasible.”
Ambassador said it was prevented from having “any input” into how the recall proceeded. “West Marine also looked to us to absorb the huge costs related to replacement and refunds associated with the unnecessary recall of thousands of bicycles,” Spiegel wrote. “Although we have endeavoured to work with West Marine to address its enormous alleged claim in a productive, non-litigious way, West Marine has been entirely punitive in its response.”
Spiegel said the company did not pay Ambassador last year for several large faucet and sink shipments, asserting a “right of off-set” against the recall claim. West Marine also filed a lawsuit for breach of contract.
West Marine told IBI that it launched the recall with its customers’ safety in mind. It said the Consumer Products Safety Commission (CPSC) mandated a total recall of the bicycles. “The CPSC’s direction was clear and unambiguous,” said West Marine, quoting the government agency’s press release. “Consumers should immediately stop using the recalled bicycles and return them to West Marine for a free replacement folding bicycle.”
The company said that CPSC maintained “direct oversight” of the recall, requiring West Marine to file monthly reports.
“No company wants to issue a recall of the products it sells,” West Marine told IBI. “West Marine is, first and foremost, committed to the safety of its customers. West Marine believes that it is irresponsible for Ambassador Marine or Associated Marketing Concepts to suggest that the bicycles subject to the CPSC recall are safe for use, and urges any affected customers to abide by the CPSC’s direction.”
The accessories retailer added that it was “disappointed” it had to initiate a lawsuit against Ambassdor to recoup the costs associated with the recall and the destruction of thousands of bicycles.
Despite the Chapter 11 filing, Spiegel wrote that Ambassador expects no interruption in business. It plans to pay trade creditors in full, according to its reorganisation plan. “We are happy to share with you that in spite of the loss of West Marine’s business six months ago, thanks to you our 2016 sales figures are actually up over the same six-month sales in 2015,” wrote Spiegel.
The company has filed several motions to ensure cash flow during the proceedings since it filed for Chapter 11 protection on June 5.