Circuit City, the No. 2 electronics vendor in the United States, filed for bankruptcy protection Tuesday (KST). Samsung Electronics and LG are among the retail chain’s key suppliers. / Korea Times File |
By Kim Yoo-chul
Staff Reporter
Samsung Electronics is considering cutting its supplier-vendor relationship with Circuit City Stores, the No. 2 electronics chain in the United States, after the retailer filed for Chapter 11 bankruptcy protection from the court.
"Despite aggressive efforts to talk to its vendors, it is highly unlikely that Samsung will continue its tie-up with Circuit City as the possibility is very high that Circuit City will eventually file for court receivership," a high-ranking industry source told The Korea Times, Tuesday, adding Samsung plans to meet Circuit City officials to check on further details.
Samsung executives said that it was reviewing the situation with a U.S. representative denying any immediate plans to terminate the company's contract with the electronics vendor.
Samsung and the four other largest suppliers of Circuit City ― Sony, Hewlett-Packard (HP), Toshiba and Canon USA ― provided about 47 percent of goods sold at the outlet chain in 2007.
Samsung, which sells almost all kinds of its key products ranging from flat-screen TVs to home appliances through Circuit City, is the store's second-biggest unsecured creditor after HP.
Circuit City owes Samsung nearly $116 million in unsettled payments. HP is moving to terminate a contract with the vendor, according to sources.
"Samsung's withdrawal can further aggravate Circuit City's financial problems," the source said.
Samsung said all of its unpaid bills from Circuit City are insured and therefore Samsung won't suffer any losses.
As part of efforts to slim down its organization and get itself afloat again, Circuit City plans to close at least 150 stores and cut its payroll, according to industry sources.
Meanwhile, LG Electronics will open additional talks with Circuit City to decide whether to continue its partnership with the retailer. LG said one quarter of its global sales comes from the North American market, while Samsung said the U.S. market accounts for some 20 percent.
"We don't have any immediate plans to collect unpaid bills. A decision will be made in due time and course," an LG spokesman said. LG, together with its U.S. unit Zenith Electronics, has a combined $41.1 million in uncollected bills that are covered by insurance.
Samsung and LG executives said their sales of electronics products in the North American market may fall in the mid- to long-term.
"It's not clear whether Samsung and LG will collect their money. The Circuit City case means other major retailers are not absolutely free from the current economic situation,'' a Samsung spokesman said.
He added that the credit situation of its other clients ― Best Buy, Wal-Mart, Home Depot and Sears are "still safe."
The South Korean electronics duo clarified they won't significantly increase the amounts of products to other bigger retailers because they are under pressure for profits and less willing to extend or alter terms to avoid being saddled with more unsold inventory.
yckim@koreatimes.co.kr
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