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Under threat: Discovery supplies to Australia are in jeopardy as production faces shutdown.

Land Rover is embroiled in a storm over future Discovery production

24 Jan 2002

SUPPLY of Land Rover Discovery four-wheel drives in Australia is under threat as the British manufacturer's chassis supplier slides toward bankruptcy.

Refusing to meet exclusive supplier UPF-Thompson's demands for a £45 million ($A125 million) insolvency bailout, Land Rover is believed to have entered negotiations with another component manufacturer while it attempts to reach a settlement with UPF receiver, auditing firm KPMG.

The dispute goes before a bankruptcy court this Friday, the date a court injunction that has kept Discovery chassis supply moving for the past couple of weeks expires.

Land Rover Australia marketing manager Glenn Forster confirmed overseas reports that 1400 direct and up to 10,000 indirect jobs in the UK were in jeopardy and supplies to Australia were under threat as Discovery production faced shutdown until the matter was resolved.

He said the current stockpile of vehicles on the ground here and shipments already confirmed for the Antipodes should ensure customer orders for the mid-sized off-roader are fulfilled until July.

But supply beyond then will depend on the outcome of events in the UK - the most likely of which, according to the London Financial Times, will be the appointment of engineering group and existing component supplier for other Land Rover vehicles, GKN, as the new sole chassis supplier for Discovery.

"If Discovery sales continue to move as they are, I'd have to say that ... our supply wouldn't be actually cut off until the end of March and then we'd probably have up to another three months beyond that," said Mr Forster.

"After that is, 'What happens next?' so to speak."Land Rover chairman Bob Dover is reported to have said Discovery production could be stalled for up to six months, though Mr Forster, who was in England last week, insisted the tooling-up process for a new supplier could be fast-tracked if required.

"I don't know what's going to happen long-term," said Mr Forster.

"First and foremost, we don't want to disrupt supplies to our customers - they're the people that we've got to look after, and we've got to also look after the people on the factory floor."Facing debts believed to be unrelated to Land Rover and estimated at £50 million ($A135 million), UPF-Thompson is within its rights to seek revenue from clients, however the British four-wheel drive manufacturer - itself in the midst of a recovery plan - has refused to accede to the £45 million demand.

Mr Forster said Land Rover had offered to make a goodwill payment of £4 million ($A11.15 million) and increase the chassis price by 20 per cent, but that these were rejected in the first round of negotiations with KPMG.

The company has also pledged to back a management buy-out of UPF - and has threatened to "blacklist" KPMG unless it ends its present course of action.

A stalemate would add to the pressure already on the Discovery in Australia, which is now swamped with rivals in the mid-size four-wheel drive segment and in 2001 posted its lowest annual sales result (3203) for more than five years.

Land Rover has addressed the problem through sponsorship of the Survivor Africa television series, development of a new advertising campaign with Bush Tucker Man Les Hiddens and the addition of an optional Adventure Pack onto Discovery, though Mr Forster conceded more could be done.

"I don't think our presence in the marketplace was perhaps as strong as it could have been in 2001 in terms of getting the most effectiveness out of our visibility and awareness," he said.

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