Jabil has gone to court against the largest consumer sewing machine company in the world.
In a lawsuit filed in Pinellas County Circuit Court, Jabil, a manufacturing services firm, says Singer Sourcing Limited LLC owes Jabil more than $2.3 million.
Singer asked Jabil to provide manufacturing services for a new line of sewing machines, but cancelled the project after two years and $2.6 million incurred by Jabil in pre-production costs, according to the lawsuit. The deal fell apart after an ownership change and internal shakeup at Singer in 2018.
Requests for comment from both Singer and from Jabil were pending return. The lawsuit was filed Aug. 7 and a summons was issued to Singer on Aug. 10, according to Pinellas County court records. As of Tuesday, Singer had not filed a response in court.
Jabil (NYSE: JBL) is the largest company headquartered in St. Petersburg and the largest public company based in the Tampa-St. Petersburg metro area, with nearly $26 billion in 2019 revenue.
Singer, a 169-year-old company based in Lavergne, Tennessee, invented and designed a new line of sewing machines and in 2017, engaged Jabil to provide manufacturing services, using project names “Jagger” and “Springsteen,” according to the lawsuit.
Singer “understood and agreed” that part of the process included pre-production, or start-up costs, which are common in the manufacturing industry. Jabil got started with the project, while a manufacturing services agreement was being negotiated. Kevin Bush, who was Singer’s senior vice president and chief operating officer, repeatedly told David Basch, a business unit director at Jabil, that Singer was excited about the projects and committed to them, the lawsuit said.
Singer was acquired by Ares Capital Corp. (Nasdaq: ARCC), a global alternative asset manager, in spring 2018. The manufacturing services agreement between Jabil and Singer had not been finalized but Singer “continued to assure Jabil that Singer was proceeding with the projects as planned and in good faith,” the lawsuit said.
“The Singer board is 100 percent on board with project,” Bush wrote to Basch in an email dated May 10, 2018 and included in the lawsuit.
At the end of May, Jabil and Singer signed a pre-production agreement, saying Jabil would either make 2.1 million sewing machines, enough to reimburse its pre-production costs, or be reimbursed by Singer for those costs. Jabil had built a dedicated business unit, hired engineers and supply chain experts, bought equipment and allocated manufacturing floor space for the project. Through the summer of 2018, Jabil and Singer continued to work together and the costs for Jabil climbed to $2.6 million.
In October 2018, Singer sent a notice to Jabil that Bush, who had been the point person in the deal, was no longer senior vice president and COO. Still, Jabil continued to perform under terms of the pre-production agreement, the lawsuit said.
In July 2019, Singer formally notified Jabil it wouldn’t pay the amount due, terminated its business relationship and cancelled production, the lawsuit said.
Jabil’s lawsuit against Singer alleges breach of contract, misrepresentation and other claims, and Jabil is asking for $2.3 million in damages as well as interest, costs and attorney’s fees.
Although Singer has not responded to the St. Pete Catalyst’s request for comment, Kipp DeVeer, CEO of the company’s owner, Ares Capital Management, said during an Aug. 4 earnings call with analysts that Singer has “struggled.”
“We’ve gone in, we’ve literally reengineered the entire business, running it in terms of its board, its management team, its strategy and all of that. And the markup is simply reflection that profits are up, and we think the value is higher than it was last quarter. And we think the prospects for the business are much, much better. So this is just going in and doing what we actually tell people that we do, which is roll up our sleeves and get involved in the underperformers and create value,” DeVeer said, according to a transcript posted by The Motley Fool. “So hopefully, we’re on a path down the line to a realization, but I don’t think there’s anything happening tomorrow.”