Garment firm (GIL) in Ho Chi Minh City sues Amazon for $280mn
Garment firm (GIL) in Ho Chi Minh City sues Amazon for $280mn
Binh Thanh Import - Export Production & Trade JSC (Gilimex), a garment manufacturer headquartered in Ho Chi Minh City, has filed a lawsuit against e-commerce giant Amazon, demanding US$280 million in compensation due to the latter’s breach of agreement.
Gilimex, which manufactures textile and garment products such as handbags, backpacks, and clothes, on Thursday publicized the information on its website.
In its statement on the website, Gilimex chairman Le Hung said the Vietnamese company has been partnering with Amazon since 2014.
However, Amazon has violated their cooperation agreement, which may affect the operation of Gilimex.
To protect its legitimate benefits as negotiated by the two sides, Gilimex is completing legal procedures to sue Amazon.
In particular, Gilimex accused Amazon of suddenly scaling down orders after online spending growth cooled down this year, causing Gilimex to face an excessive capacity and a high raw material inventory.
Since Gilimex became a partner of Amazon, it has invested tens of millions of U.S. dollars in building warehouses to store Amazon’s goods.
These warehouses have robots, which help speed up the fulfillment of online orders. Workers do not have to run around the facilities.
Gilimex has recruited more than 7,000 employees in many factories to produce over one million warehouse storage units per year. Production for Amazon has increased 20-fold over the past eight years of cooperation.
According to Gilimex’s 32-page lawsuit, its partnership with Amazon is built on trust. The Vietnamese manufacturer relies on Amazon’s forecasts to buy materials, invest in factories, and recruit employees to meet the demand of the American firm.
However, in April and May this year, Amazon “immediately changed and reduced the projected demand” for the rest of 2022 and 2023 to a small fraction of previous forecasts.
It is worth noting that Amazon is the largest customer of Gilimex with orders worth $146.6 million in 2021. To meet the demand of Amazon, Gilimex has rejected other major customers, such as IKEA and Columbia Sportswear.
During the COVID-19 pandemic, Gilimex relocated its production and packaging facilities to satisfy Amazon’s demand.
“While Amazon earned unprecedented revenue growth during the pandemic thanks to an explosion in online orders, Gilimex’s executives and employees risked their lives every day to make such record growth a reality,” Gilimex said in its lawsuit.
According to Bloomberg, Gilimex has filed the lawsuit in the New York State Supreme Court on Monday.
The lawsuit provides a rare glimpse into Amazon’s relations with suppliers needed to fuel its rapid expansion during the pandemic and how those suppliers often took big risks, Bloomberg reported.
After Amazon turns its back on Gilimex, the Vietnamese company is now facing volatility.
Its financial report showed that its revenue in the third quarter of this year plunged 83 percent over the previous quarter and 66 percent year on year to VND213 billion ($9 million).
Although Gilimex’s net profit rose to VND129 billion ($5.4 million), it was mainly from the divestment from its affiliated company.
With its mission to become a leading company in textile and garment in Vietnam, Gilimex’s lawsuit against Amazon raised concern among investors.
As soon as the news about the lawsuit spread, Gilimex, whose stock code is GIL, closed the Thursday session at its floor price, at VND26,250 ($1.1), which was contrary to its growth on the previous session.
In mid-April, GIL reached VND82,680 ($3.5).
‘Standing on the shoulders of giants’ will open up many opportunities but pose multiple risks as well.
Earlier, two large firms in the same sector, including Song Hong Garment and Thanh Cong Garment, were put at a disadvantage as their U.S. partner went bankrupt.
