Parts companies must protect themselves

An article extracted from the Birmingham Post, Thursday 20 April 2006

Coventry companies that rely on Peugeot for a significant part of their income are being urged to implement immediate damage limitation plans to avoid being dragged down by the car firm's imminent closure.

Gavin Bates, who runs our BRI Coventry office, says firms that believe they could be hit by Peugeot's demise should be talking with their banks and professional advisers.

Unless they do they risk being overwhelmed by events 18 months from now when the Ryton plant as we now know it is expected to close.

"Companies that rely on Peugeot for a significant proportion of their business - and that includes shops, hotels and others in the chain - should be reviewing their business plans, and decide how they are going to generate new turnover," said Mr Bates.

In the case of suppliers he believes diversification is the key to survival, but warns that time is short.

Although less damaging to the West Midlands ' economy than Rover's collapse, Peugeot's bombshell decision to end production of the 206 model, and close the Ryton plant, may well put pressure on a number of local firms that count on the firm for regular orders.

Many firms too heavily reliant on Peugeot for their work will risk going under, unless they are thrown a lifeline.

Mr Bates believes Advantage West Midlands, the region's development agency should step in with a rescue package to help the sub-region to weather the crisis. In addition to the 2,300 jobs that will be lost in the closure, there will be a ripple effect throughout Coventry and parts of Warwickshire from where the workforce is drawn.

"Closure means the loss of 2,300 pay packets that are currently spent in shops, pubs, restaurants and leisure facilities all over the area," said Mr Bates. "Many of these businesses will feel the pinch and they need to act now to offset the worst of the damage."

The limited number of supply chain firms in the region should also be planning immediate 'self help' action, says Mr Bates, from his office in The Quadrant.

"Firms should take action now to find whatever replacement work they can, cut costs to the bare minimum and shed surplus staff - in fact do anything that they need to do to survive," he said. "If they are struggling to put a new business plan together to ensure that their business recovers, we can help them."

Mr Bates added: "They should be doing all of this right now, not in six months or twelve months time. My experience is that it's very often the loss of turnover that causes problems, rather than loss of profit."

"It is also important for companies to let their banks and professional advisers know what is happening. With their help they can reschedule debts and make sure they have the capital they need to weather the immediate storm."

Should you require any further information, please contact Gavin Bates at BRI Business Recovery and Insolvency.

Important Note: This Briefing has been prepared as background information for the general professional advisor and is not a comprehensive statement of law - we recommend that expert advice be taken on specific issues arising in practice.