KPMG fight for Land Rover 'ransom'.
The spat between Big Five firm KPMG, receiver to chassis supplier UPF, and car manufacturer Land Rover has caused heated debate in the insolvency profession. As the industry take sides.
The public row involving Land Rover and the supply of chassis has receiver KPMG caught between a rock and a hard place.
On the one hand the receiver is trying to secure enough money to keep creditor and chassis maker UPF-Thompson afloat and, on the other, it has to make some attempt to keep Land Rover happy.
The case hit the headlines when Land Rover took out an injunction against UPF after the company’s receiver, KPMG, demanded #35m to continue supplying the company with chassis. UPF, which went into receivership with debts of #50m, is Land Rover’s sole chassis supplier and halting delivery would have brought car production to a halt.
It is believed that Land Rover attempted to seek alternative supplies but the price was too high.
The case is similar to one in 1999 when Transtec, a supplier to Ford, went into receivership. The judge ruled in favour of receiver Andersen, saying it was not exploiting the commercial dominance when dealing similarly with Ford.
The case has stirred up debate in the insolvency world. By and large practitioners have come out on KPMG’s side, saying the receiver is simply doing its job.
Keith Goodman, president of the Insolvency Practitioners Association, says: ‘An insolvency practitioner will always try to use whatever commercial advantage he can. He’s trying to make the company survive.’
But Phillip Long, head of business recovery at PKF, suggests KPMG has been ignoring the company’s interests to keep its customer base. He said: ‘As a generality, practitioners must try to keep customers as they are trying to sell the business as a going concern.
‘You can’t hold big customers like Land Rover to ransom.’
For Goodman however, a receiver cannot help a company if it is likely to fail in the long-term because it is selling its product at a price that is not viable. ‘No receiver will try to sell a company unless he puts it on a profitable footing.’
Some practitioners believe the case is symptomatic of the current economic climate, where small companies end up paying.
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Jeremy Willmont, an insolvency expert at Moore Stephens, says smaller companies ‘take all the pain’ and are forced to give free credit to larger ones. ‘It is on rare occasions like this when the shoe’s on the other foot and the big guys don’t like it. This is going to continue happening for as long as large companies continue to force prices down so low that their suppliers can’t operate profitably.’