Posted on 12/28/2004 7:47:44 AM PST by Brilliant
BEIJING, Tuesday, Dec. 28 - China's biggest television exporter announced major losses Tuesday stemming in part from declining sales in the United States and an unfolding financial scandal involving its biggest American customer.
The exporter, the Sichuan Changhong Electric Company, announced earlier that it would be reporting its first loss, up to nearly a half-billion dollars, because of unpaid accounts with Apex Digital Inc., a company in Ontario, Calif.
A Changhong spokesman, Liu Haizhong, said on Tuesday that Apex Digital owed it $468 million. The spokesman did not specify what period the amount covered.
Changhong estimated that it might be able to recover $150 million and said that it was making provisions to take losses on $310 million. It also said that Apex had suffered large losses to royalty payments, United States antidumping measures "and adverse business factors and is experiencing considerable hardship making full payments."
The announcement of the losses followed a report in a Chinese newspaper of the detention in China of the president of Apex Digital, David Ji, on charges of financial fraud.
According to a report in Monday's 21st Century Business Herald, a Chinese-language newspaper, Mr. Ji was detained in the southern city of Shenzhen after an investigation by police from Sichuan province, where Changhong is based.
Apex Digital has been a big seller of lower-price televisions, DVD players and other home entertainment products at discount retailers like Wal-Mart.
Problems with its largest customer would be the latest blow for Changhong, which has seen its sales in the United States decline. Earlier this year, the Commerce Department imposed 25 percent tariffs on televisions exported to the United States by Changhong and other Chinese makers after it decided they were dumping sets by selling them below a reasonable market price. Apex has also been accused of ignoring royalty payments for patented DVD technology.
In the first half of 2004, Changhong exported $200 million in television sets, compared to $600 million for all of last year, Mr. Liu said. In recent years, Changhong has made about 90 percent of the television sets China exports to the United States, and Apex has sold about 90 percent of Chinese-made TV's in America.
A spokeswoman for Apex Digital, Marietta Schoenherz, initially said yesterday she had not heard any news of Mr. Ji's supposed detention.
Later she issued a statement from the company's general counsel, who was not identified, that said that a disagreement between Changhong and Apex was being addressed. The statement also said that the company anticipated Mr. Ji's "return to the United States shortly."
Ms. Schoenherz said she could not answer any other questions about Apex's relationship with Changhong.
Claims of fraud abound in China's business world, but analysts said this case, because of the companies involved, has the potential to tarnish China's standing in the American electronics market.
"Lack of confidence would hurt everyone," said Richard Doherty, the research director of the Envisioneering Group, an electronics market research company in Seaford, N.Y. "It will be a less bad situation if it's just a few rotten apples and not a whole crop."
Trading in Changhong was suspended Monday on the Shanghai stock exchange; its stock is down 27 percent for the year.
Until recently, Mr. Ji and Apex Digital had been among the celebrated stars of China's effort to shift more of its trade from simple manufactured goods to more lucrative electronics products.
Mr. Ji, 52, was born in Jiangsu province in eastern China and moved to the United States to study in 1987. He started Apex with a Taiwanese partner in 1997, along with investors from the United States, Taiwan and China. Apex's low-cost products quickly became strong sellers in Wal-Mart and other stores, and in recent years it has dominated some sectors, like DVD players.
But analysts said that Apex's presence in the United States had dimmed earlier this year because of its shrinking investment in new products and advertising. As advertising slowed, its shelf space plummeted in recent months, Mr. Doherty, the analyst, said. He estimated that its market presence had dropped 80 percent this holiday season, and he noted that it would be much less prominent in the Consumer Electronics Show, a major showcase for new domestic electronics that opens in Las Vegas in a few days.
Changhong's once close relationship with Apex apparently soured after Apex announced it would no longer sell cathode-tube televisions 25 inches or larger. It did so to avoid new Federal Communications Commission requirements that larger televisions carry receivers for digital broadcasts.
The move sharply reduced orders to Changhong, said Riddhi Patel, a senior analyst with iSuppli Corporation, an electronics research firm in El Segundo, Calif.
"They had a closely integrated relationship, and Changhong's production has been impacted," Ms. Patel said in an interview. At one time, in 2002, Apex sold three million Changhong-made televisions in the United States in eight months.
Earlier this year, executives from both companies denied a report in a Chinese business newspaper that they had been caught up in large financial fraud in the United States. A few months ago, Changhong replaced many of its senior executives, and some analysts have suggested the new leadership might want to sweep aside past business ties.
In an interview last year, Mr. Ji denied his company owed Changhong any money, citing a financial arrangement whereby Apex took 10 percent cut from sales of Changhong-made televisions but never owned them or directly took money from retailers.
In addition, Changhong's boss, Niu Runfeng, took personal charge of dealings with Apex, ignoring normal safeguards in an ambitious attempt to expand sales in America, according to Chinese press reports yesterday.
It is far from clear whether the latest claims of financial abuses have any relation to dumping, but analysts said they may revive the accusations that Chinese TV exporters have made reckless deals to increase overseas sales.
"This may foreshadow another wave of claims and protests," Mr. Doherty said. "This will be closely followed by companies and lawmakers."
Where does our government get off telling a business how much it must sell a product for?
Karma happens.
Why on earth is the US government trying to get the Chinese to charge us more for TVs?
Paraphrasing Will Smith in "I, Robot": Somehow 'I told you so' doesn't quite cover it.'
Some business strategy. If Sichuan doubles its efforts, it'll lose a cool billion per year.
Who'd have guessed that they'd get taken to the cleaners by Wal-Mart?
Ahem. The Constitution.
Article I
Section 8.
The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States;
To borrow money on the credit of the United States;
To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;
No wonder that APEX stuff is so inexpensive.. Dirt cheap...
I think you've found the solution. Tax the living daylights out of the Indian casinos and pay off the national debt...
yeah. i bought a dvd player for $29. thanks sweat shop guys.
I got one that cheap too. But I think mine was made by prisoners.
Exactly. Then you'll get the Buchanan knuckle-dragging protectionists here complaining about our large trade deficit. It makes no sense.
And all American consumers benefit. What is wrong with that?
Apex... Maker of the $49 DVD player!
Mark
Are you comfortable with your government telling you how much a TV should cost? If so, you'll love the government healthcare system. Confusious says: "May every aspect of Anitius Severinus Boethius' life be run by government."
No wonder I got an Apex DVD player at Circuit City for $29.99.
You asked where they "got off" telling a company how much to charge. It's a power granted to Congress via the Constitution. Where did my likes or dislikes enter into it, or where exactly do they have the power to modify the wisdom of the Founders?
You seem under the belief that Congress can impose tariffs on any compay, but they only have the power to regulate tariffs on foreign goods being brought into our Nation. They aren't telling you how much a TV should cost to you, they are telling China how much it will cost China to import a TV for sale in the U.S. If you don't see the difference that's not my fault or problem.
You asked a question. I provided you with a fact. You don't like it. That's the end of my involvement with your problem.
All TV manufacturers in America close.
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