Questions still remain in Maclaren USA bankruptcy case

Jane Kitchen, March 8, 2012

Norwalk, CT -- As Kids Today has reported, Maclaren USA, the former U.S. distributor of Maclaren prouducts, quietly filed for Chapter 7 bankruptcy protection on December 29, 2011 -- and that move went unnoticed until last week, when reports began to surface, first in the blog world, then in the mainstream media.

The filing, once uncovered, raised questions. With Maclaren's Hong Kong office owed $13.1 million of the $15.9 million in liabilities, and Maclaren CEO Farzad Rastegar as an additional creditor, it seems most of the money owed to people not affiliated with Maclaren is either owed to designer David Netto, or is tied up around seven unresolved court cases of children whose fingertips were amputated by Maclaren strollers.

Chapter 7 bankruptcy ends in liquidation rather than reorganization, and also specifically discharges a company from lawsuit judgments.

Which has put the company in something of a PR nightmare.

Maclaren has been fairly silent on the issue, not returning phone calls to reporters from the New York Times, the Wall Street Journal, or the Huffington Post.

But Bevin Gove, director of public relations for Maclaren, did issue this statement to Kids Today:

"Since 2010, Maclaren North America, a wholly-owned subsidiary of Maclaren Distribution Limited, has been distributing Maclaren products in the USA, Canada, Mexico, and Puerto Rico. Maclaren has made a strategic decision to take direct control of its worldwide distribution to ensure closer connectivity with both retailers and consumers, and to provide more efficient management of the brand. As a result of this strategy, Maclaren has ceased working with distributors in more than 30 countries, one of which was the focus of recent media coverage in the U.S.A. Maclaren North America regrets the recent confusion in the U.S. media and remains focused on continuing to grow its business in 2012 and beyond."

In an earlier release sent to Baby Gizmo, Maclaren detailed that American Baby Products Inc., the parent company of Maclaren USA, lost its right to distribute Maclaren products in the fall of 2010, which explains the drop in sales from more than $20 million in 2010 to just $34,000 in 2011; Maclaren USA was no longer distributing the products.

But retailers were still receiving and selling Maclaren products, and still are today -- only, as Maclaren's statement to Kids Today explains, since 2010, Maclaren North America has been distributing those products -- not Maclaren USA.

"It's them dismantling their U.S. business intentionally and moving those sales to Hong Kong," said David Netto, who was until recently creative director for Maclaren Nursery. "Those sales didn't go away."

Netto is listed as a creditor for $1.1 million from the sale of his NettoCollection company to Maclaren, and said he was informed of the bankruptcy late last month by a form letter from the court. He has since resigned.

"I worked for them in daily communication for over two months before I found out about (the filing)," said Netto.

In addition to the $1.1 million listed on the court documents, Netto said there is up to $5 million in royalties which largely has not been paid to him, and that Maclaren stopped paying royalties about a year and a half ago.

"I don't understand why it's worth it to them to behave like this so publicly," said Netto. "In the baby business more than any business, all you have is your reputation...If you're going to be in this industry, you have to be accountable to parents and children and everybody else."

Despite all the questions, Netto still stands behind Maclaren's products.

"I think that every retailer should call the company and ask them to explain themselves," said Netto. "But I think they should go on selling Maclaren strollers, because it's a great product."


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