28 February 2002 | David Arminas
Land Rover's decision to bail out a debt-stricken major supplier has shown that risk management should now be a priority for all purchasers, according to a leading supply chain academic.
Peter Cooke, professor of automotive industry management at the Centre for Automotive Industries Management, Nottingham Trent University, said: "Purchasers should be running financial hygiene tests on their major suppliers, especially if they are single-source deals."
Last week, Land Rover paid a figure - said to be up to £16 million - that its single-source chassis supplier UPF-Thompson owed to the banks. In effect, Land Rover is now one of UPF's lead creditors.
Land Rover's problems began last month when KPMG, UPF's receiver, threatened to stop delivery of chassis for the Discovery model if the car maker did not pay upwards of £45 million. It later won an injunction prohibiting KPMG from ceasing delivery.
The lesson is that purchasers must keep a close eye on the financial health of suppliers and that means more than looking through their books, said Dick Jennings, partner in Leeds-based solicitors Ford & Warren.