Mayflower’s lapse into receivership last week may have Ford executives feeling uneasy.

A similar downfall at Land Rover supplier UPF-Thompson in 2002 led to Ford’s partial bailout of the sole supplier of Discovery chassis to prevent an embarrassing and costly production stop.

Land Rover chief executive Joe Greenwell might well feel a shiver as he considers events at Mayflower, a key supplier of body panels and pressings to Land Rover’s Range Rover, Discovery and Freelander.

The UK bus builder and body panel supplier is also the aluminium space frame supplier for the Ford GT, production of which will start in Wixom, Michigan, later this year.

Add in supplies of door, hood and roof panels for the Aston Martin Vanquish and various panels for Jaguar, and Ford starts to look exposed.

Mayflower Vehicle System’s German and US operations are not directly affected directly by the receivership. But there are knock-on effects of insolvency at the UK operations.

Mayflower’s fall from grace has been swift and brutal. The recently departed management presided over a reduction in the company’s market capitalisation from around £700 million a few years ago to under £25 million when the shares were suspended on March 30.

Warning signs were evident in December when Mayflower announced a successful refinancing for a syndicated loan. The company stressed that it remained a profitable and cash-generating business, but also warned that profits would likely fall below market expectations for the fiscal year.

Another profits warning followed soon afterwards. Though the company said net debt would be 10% better than anticipated, it was the scale of indebtedness – now around £200 million – and the discovery of an unanticipated £20 million black hole in the accounts that finally drove Mayflower aground on March 31.
Deloitte and Touche entered as receivers, and three key executives – John Simpson, CEO; David Donnelly, finance director; and John Fleming, joint managing director – departed.

Simpson was one of the Mayflower’s founders in 1989. He was the instigator of Mayflower’s audacious, but failed, attempt to prise Rolls Royce Cars from Vickers in 1998, before Ferdinand Piech stepped in on behalf of Volkswagen.

Acquisitions contributed to debt

TransBus, Mayflower’s high-profile bus-building operation, is probably the underlying cause of the company’s failure. It was bolted together in recent years through expensive acquisitions that contributed to the debt.

But Mayflower Vehicle Systems is the most important to OEMs and other customer suppliers. MVS has built up a significant design, development and manufacturing business in the automotive body field, both in Europe and North America — especially for aluminium panels.

Mayflower is a key supplier to Land Rover, Aston Martin, Jaguar, MG, Rolls Royce and Bentley. It also supplies structural parts for Audi‘s A8 and TT as well as similar parts for Mercedes-Benz, Volkswagen and Porsche.

Its Gaggenau, Germany, facility supplies parts for the new BMW X3 and ships exhaust components to Tenneco, Eberspacher and Faurecia.

In North America, MVS supplies Navistar‘s HD2 aluminium cab assembly and will soon start output of the Ford GT body at its Shadyside, Ohio, plant.

MVS’s UK and European business generated sales and operating profits of £45 million and 1 million in the first half of 2003. The US operations had results of £90.4 million and £4.5 million.

Despite the slim margins, Mayflower says the recent restructuring has positioned it for growth and that contract wins have assured long-term revenue streams.

The customer base has broadened and MVS has not shied away from new investment. The company ploughed £23.5 million into a new high-tech, state-of-the-art stamping facility in Fort Parkway, Birmingham, England.

The plant will make parts for the new generation of Land Rover models including the new Discovery/LR3 – all based on the T5 platform. This is now ready for volume production. It can produce steel and aluminium body panels at high volumes.

The new facility will have the flexibility to operate dies from all of Ford’s PAG in-house stamping facilities, including those at Solihull and Halewood. Some see the Fort Parkway plant as an extension to and possibly someday a substitute for PAG’s own stamping assets.

Mayflower executives say the site can be doubled in size and that there has been much interest in it from other major OEMs.

The UK operations, whose history can be traced back to the former BMC Pressed Steel Fisher facilities, include five press lines with 13 presses capable of producing 7.5 million panels a year.

The German operations have four transfer lines with hydraulic and mechanical presses.

Analysts expect break-up

Most analysts expect Mayflower to be broken up. Some estimate the value of MVS alone at around £55 million.

Melrose, a UK based financial investment group, had already expressed interest in acquiring the group before last week’s crash and is likely to pursue the matter in coming weeks.

Fragmentation of the MVS business cannot be ruled out. Earlier rumours suggested the US operations may be sold off separately.

Whatever the outcome, Ford will be watching closer than most.

With the new stamping facility in Birmingham, England, poised to be the key supplier of panels for new Land Rover models – and the US operations in a similar position with the Ford GT – Ford executives will pray that a swift and neat solution will emerge from the wreckage.