Land Rover and accountants KPMG, the administrative receivers of Upf (UK) Limited, have reached an agreement ending a major row over Discovery chassis supply already twice-fought in court.
Neither Land Rover nor KPMG will disclose the terms of the settlement but it is understood that Land Rover has paid substantially less than the amount KPMG originally sought in a deal which a carefully-worded statement described as “the acquisition of the debt by Land Rover, who will facilitate the continuation of the business through a number of committed parties.”
Those “committed parties” are understood to include GKN. A Financial Times report on January 25 said that the Ford subsidiary had invited GKN to consider alternative tooling and supply arrangements for its Solihull plant in the Midlands and added that GKN could emerge as a possible buyer for UPF.
Land Rover would not confirm GKN#;s involvement today but the joint statement with KPMG said: “The exact details of who will assume responsibility for the different sectors of UPF Thompson have yet to be finalised and are subject to due diligence.”
KPMG was called in last January as receivers after UPF-Thompson, which employs 600 and has supplied Land Rover since the 1950s, had accumulated debts estimated at over £50m — virtually double its annual sales.
The international audit firm originally demanded payments of about £45 million (approximately $US65 million) from the SUV maker to secure the future of UPF-Thompson, its only supplier of Discovery chassis.
KPMG said that a precedent for its demand was set two years ago following the demise of TRANSTEC when receivers asked Ford to agree to a new five year contract and a 60 percent price increase. Supply of parts to Land Rover Group was being maintained “while attempts are being made to find a settlement”.
That started a major row with Land Rover warning the UK government that KPMG’s actions were in breach of the SUV maker’s contracts with its chassis supplier, and could jeopardise its turnaround plan to reverse annual losses of $US250 million. Up to 1,400 Discovery production jobs and a further 10,000 supplier posts were in jeopardy, the company stressed.
Land Rover won an initial court injunction forcing UPF to continue supplies until January 25 and later returned to court seeking a further injunction to ensure supplies once the initial injunction expired.
Land Rover also offered to increase the price it paid for the chassis and was also willing to make a goodwill payment of up to £4 million to secure a continued supply of Discovery chassis. It also pledged to back a management buy-out or trade sale of the company.
But KPMG initially rejected all offers though negotiations remained open.
Last week, The Daily Telegraph reported that Land Rover was close to an agreement where the SUV maker would pay between £10m (US$14m) and £20m ($US28m) of UPF’s £50m (US$71m) debt in exchange for the replacement of KPMG with its preferred receiver.
Land Rover would subsequently consider UPF’s options and engineer a management buy-out or a trade sale with GKN, the paper said.
While stressing she could not comment on details of a settlement, a Land Rover spokeswoman today did not dispute the recent reports.
“Land Rover and KPMG, together with the banks who appointed them, are confident that this is in the best interests of all concerned parties and that the agreement comes as a result of the professional conduct of all parties throughout the negotiations. All parties acknowledged that this was a complex case with potentially wider implications for British industry and are therefore delighted to have reached a win-win resolution,” the official settlement statement said.
The Land Rover spokeswoman said that Land Rover was still not happy with UK law relating to the receivership of “small suppliers” such as UPF and would continue to seek changes in the administration and receivership procedures that had led to the row.
She added that the company was pleased with the support it had had from the courts in granting the continuity of supply injunctions.