Land Rover has managed to secure a High Court ruling in Birmingham forcing its parts supplier, UPF-Thompson, to continue delivering parts despite rising losses and debts.
Land Rover has managed to secure a High Court ruling in Birmingham forcing its parts supplier, UPF-Thompson, to continue delivering parts despite rising losses and debts.
Land Rover, a division of Ford, was forced to go to court after British engineering group UPF-Thompson went into liquidation last month, and its receivers, KPMG, demanded a R800 million payment from Ford. UPF-Thompson is the sole supplier of chassis for the Discovery, Land Rover’s second biggest selling vehicle after the Freelander.
KPMG claimed UPF was entitled to treat a dependent customer as an asset to exploit on behalf of creditors owed about R800 million. Land Rover would have had to cease production of the Discovery and lay off some of the 1 400 workers who produce the vehicle until the dispute is resolved, Kay Francis, a Ford spokesman said.
The High Court calculated that Land Rover had faced a claim for R800 million to maintain supplies from UPF, but the contract was worth only R240 million a year. The court suggested that the receivers may have acted illegally by demanding a goodwill payment in order to continue payments. Land Rover had offered to pay more for the chassis and make a goodwill payment of about R68 million, but KPMG rejected the offer.
Meanwhile, Bob Dover, chairman of Land Rover, has urged the British government to introduce insolvency laws based on Chapter 11, the bankruptcy protection used by US companies, to help sustain loss-making component suppliers in Britain.
“We’ve got to sort the law out on this . . . we cannot be expected to take on our suppliers’ liabilities.” Dover told . “Britain needs something like Chapter 11 in the US to enable companies to get out of trouble without these sorts of catastrophic demands.”
