Story on Lumber Liquidators

[Mike Henderson]

Looks like Lumber Liquidators got caught selling flooring with high formaldehyde levels - story here.

Mike

[Malcolm Schweizer]

To be fair, their name is "Lumber Liquidators." They just failed to mention is that the "liquid" is formaldehyde. :')

[Mike Henderson]

If I recall their story correctly, they started as a liquidator of left over lots of flooring, and were successful. The problem was that they may not have had enough of the flooring you liked to meet your project, and if you came up short, you were out of luck because there wasn't any more. But as long as you knew the limitations, the price was right.

But as they grew, there wasn't enough left over lots of flooring to meet their growth so they started buying new flooring, just like every other flooring supplier. But when you're buying new, you're the same as every other flooring retailer. To get a price advantage, it looks like they started buying cheap flooring from China that had high levels of formaldehyde, and allowed them to maintain their price advantage.

By the time they finish paying for the replacement of the flooring they already sold, and write off all of their inventory, plus pay the lawyers and penalties - and maybe face criminal prosecution, they'll probably file for bankruptcy. Good riddance!

Mike

[ryan paulsen]

I think the best part of this story is the advertisement on my screen that the auto-bot added to this post is for LL

"As flooring experts we care too much to sell anything but the SAFEST AND HIGHEST QUALITY FLOORING"

[Brian Tymchak]

I saw the 60 minutes report last night. If LL is knowingly selling unsafe products, they deserve all they get. The part of the story that I raised my eyebrow over is that the group backing the lawsuit is a bunch of Wall Street short-sellers. Sure seems like a conflict of interest to take a position on a stock and then file a lawsuit that will knowingly impact the stock price. Wonder if the SEC will look at that..

[Larry Browning]

My understanding is that it is limited to the laminate flooring and not the hardwood flooring they sell. Is that correct?

[Mike Henderson]

I saw the 60 minutes report last night. If LL is knowingly selling unsafe products, they deserve all they get. The part of the story that I raised my eyebrow over is that the group backing the lawsuit is a bunch of Wall Street short-sellers. Sure seems like a conflict of interest to take a position on a stock and then file a lawsuit that will knowingly impact the stock price. Wonder if the SEC will look at that..

Actually, I have no problem with a bunch of short sellers pushing this issue. It looks to me like some of them recognized that the profit margin of LL was significantly higher than their competitors - and that business is a commodity business where it's pretty tough for one supplier to be a lot more profitable than others. They then asked "Why is LL doing better?" and started investigating - maybe bought some samples of the product and had it analyzed. Based on what they found, they short sold the company.

That kind of economic incentive and risk taking is good for all of us. Otherwise, we'd have to depend on some government agency discovering the problem, testing the product, and bringing a charge (either civil or criminal) against the company.

Mike

[Judson Green]

My understanding is that it is limited to the laminate flooring and not the hardwood flooring they sell. Is that correct?

Probably not anyway to get formaldehyde in a true hardwood flooring product, doubt the finish -if prefinished- would have any.

[Phil Thien]

Actually, I have no problem with a bunch of short sellers pushing this issue.

I'm guessing this will be the new paradigm in standards compliance.

Not a terribly efficient one. After all, when the dust settles, the short-sellers will be enriched, LL may be gone, and the homeowners will be left holding the bag.

OTOH, the homeowners could have chosen materials made in the US at a price premium. No guarantee the same thing wouldn't happen, but it seems far less likely to me.

The old "you get what you pay for" adage proven once again.

[Mike Henderson]

I'm guessing this will be the new paradigm in standards compliance.

Not a terribly efficient one. After all, when the dust settles, the short-sellers will be enriched, LL may be gone, and the homeowners will be left holding the bag.

OTOH, the homeowners could have chosen materials made in the US at a price premium. No guarantee the same thing wouldn't happen, but it seems far less likely to me.

The old "you get what you pay for" adage proven once again.

I'm of the opposite opinion. Having private individuals searching for non-compliance in the hope of making some money is not bad. The alternative is to provide additional funding through taxes to accomplish the same result. And if you want private individuals to ferret out such things, there has to be some money in it for the people who do the work. Compared to funding a much larger governmental organization to achieve the same purpose, I think it's quite efficient. The problem with a governmental organization is that you don't know where the next episode of "cheating" is going to be so you'd have to have a lot of big organizations looking for cheating. Private individuals only put money into places where they believe there will be a return.

LL still has value and resources. Even if they file for bankruptcy, the claims (almost certainly a class action) will be part of the bankruptcy - similar to the asbestos litigation - a lot of companies went bankrupt in that one, but there was a fund to compensate the victims. I expect a similar situation with LL. Their resources will be used to create a fund to compensate the people who bought the material. They may not get 100% but they'll get something.

But as you point out, they would not be in that situation if they had bought from a reputable retailer.

Mike

[Phil Thien]

I'm of the opposite opinion. Having private individuals searching for non-compliance in the hope of making some money is not bad. The alternative is to provide additional funding through taxes to accomplish the same result. And if you want private individuals to ferret out such things, there has to be some money in it for the people who do the work. Compared to funding a much larger governmental organization to achieve the same purpose, I think it's quite efficient. The problem with a governmental organization is that you don't know where the next episode of "cheating" is going to be so you'd have to have a lot of big organizations looking for cheating. Private individuals only put money into places where they believe there will be a return.

LL still has value and resources. Even if they file for bankruptcy, the claims (almost certainly a class action) will be part of the bankruptcy - similar to the asbestos litigation - a lot of companies went bankrupt in that one, but there was a fund to compensate the victims. I expect a similar situation with LL. Their resources will be used to create a fund to compensate the people who bought the material. They may not get 100% but they'll get something.

But as you point out, they would not be in that situation if they had bought from a reputable retailer.

Mike

I wasn't disagreeing, I was just pointing-out that in this scenario, the homeowners will take the hit.

LL likely doesn't have anywhere near the sort of resources that producers of asbestos did. There were over 100 companies that went bankrupt where assets were turned over to that trust.

Again, not disagreeing that the method is acceptable. But the takeaway is that the homeowner must be vigilant.

[Scott Shepherd]

Just wait until they have to comply with all the regulations in China that we do here. Your cheap Chinese made products, across the board, won't be so cheap any more.

They have a disregard for doing the right thing over there, from this issue to lead in paint for kids toys to food issues, it's not something new, that's how they operate at the low end of the market. If you want top tier products, they have them to, but for the price you pay for that, you can certainly make it here.

Someone on this forum visited China to look for products and they went to a place that cut granite, etc, and I think he said there were people working with no masks, or little masks at all. Who works in a granite cutting factory with no masks? My guess is they don't live to see their 40's or 50's much from that factory floor. But hey, we get cheap granite from it, so it much be okay, right?

[Brian Elfert]

The prices of having stuff made in China is starting to go up because workers are demanding better pay and better working conditions. In some of the larger Chinese cities they are starting to realize just how much pollution lax regulations is causing. Some companies are moving production back to the USA or not going to China at all because the cost difference isn't as great anymore. Turnaround times in the USA are much faster in most cases. Some companies that manufacture in the USA want to buy all their parts in the USA if they can. There is some hardware that nobody makes in the USA anymore. It has to be bought overseas unless someone wants to have a custom order done at high cost.

I read something recently that there are basically no tanneries left in the USA. The environmental regulations here cost too much to comply with. Animals are killed here and their hides are sent overseas for tanning and then back here to be made into goods, or just as often the hides are made into goods overseas and then shipped back here.

[Rod Sheridan]

Looks like Lumber Liquidators got caught selling flooring with high formaldehyde levels - story here.

Mike

Hi Mike, that's a fairly old issue.

The latest for them is that The Department of Justice is considering charging them under The Lacey Act for illegal harvesting of timber.

Interesting company.

Personally I no longer have faith in whether my local source for imported timber has actually done the research to prove that it's from sustainable growth and I now only buy local timber..............Regards, Rod.

[Phil Thien]

Personally I no longer have faith in whether my local source for imported timber has actually done the research to prove that it's from sustainable growth and I now only buy local timber..............Regards, Rod.

I'm right behind you. Too many people willing to compromise what few principles they have, for a buck.

North American species offer me plenty of selection. I've been sticking with those.