Hooker Skewers Chinese Partners

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Motley Fool Hidden Gems recommendation Hooker Furniture (Nasdaq: HOFT) has done good business by outsourcing much of its production to foreign countries while retaining design and marketing functions in the U.S. But as an article in Friday's Wall Street Journal reported, the company is adopting a Janus-faced stance with regards to its Chinese partners: On the one hand, it demands cut-rate prices from them; on the other, it has joined other U.S. furniture manufacturers in accusing them of dumping their goods at below fair-market value.

The complaint could well result in the U.S. imposing import duties on certain Chinese products. Hooker joined the fray in hopes of protecting the jobs of its American workers who manufacture bedroom furniture (which it produces in the U.S, unlike most other furniture). But the Chinese are warning that if the Commerce Department imposes duties, they may withhold shipments of goods that Hooker and other signatories to the complaint have ordered -- and not only bedroom furniture, which is all the complaint specifies.

The list of signatories to the dumping complaint includes such other well-known brands as La-Z-Boy (NYSE: LZB), Bassett Furniture Industries (Nasdaq: BSET), and Stanley Furniture (Nasdaq: STLY).

Hooker's margins fell a bit during 2003, and if it wants to improve them it will need to increase its imports of foreign-manufactured furniture. Thus, this is not an especially good time to be picking fights with the very Chinese companies it depends on to provide those imports.

There is an issue of fairness here. Hooker says it joined the dumping complaint "to be fair to [its] employees." To which the Chinese partners would probably reply, "What about a little fairness for us?"

You see, on the one hand, Hooker relies on the market and negotiation to extract the best prices it can from its subcontractors in China, so that it can reap better profits and/or pass savings along to its customers in the U.S. (much as I described in this article). But it seems that when it is convenient, the company is not above playing the government intervention card, demanding protection from "unfair" competition.

Pick a side, Hooker. Pick a side.

Rich Smith owns no shares in any company mentioned in this article. The Fool has a disclosure policy .