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Tim O'Brien | Apr, 27 2012 | 1 Comment

The temporary halt to production and the stand-down of nearly 2000 Ford assembly line workers until Wednesday next week will affect customer orders, despite good dealer stocks of Falcon and Territory, according to Ford Australia spokesperson Sinead Phipps.

"We haven't been building willy-nilly, we build to order," Ms Phipps said.

At issue, and the reason for the halt to production, is the closure of suspension-parts supplier CMI's Campbellfield factory.

"It will definitely have an affect, we'll have to reshuffle production schedules to satisfy customer orders (once normal production resumes)", Ms Phipps said.

CMI lost access to the site when the landlord, Garshaw Pty Ltd, changed the locks earlier this week over a widely reported rent dispute. Reported claims of rent due in dispute vary between $116,000 and $150,000.

The appointed receivers and administrators of CMI Industrial are today taking action in the Federal Court in Melbourne to order Garshaw to allow access to the Campbellfield site and for the Court to issue an order preventing Garshaw "taking possession of the property or otherwise recover it". (AAP)

It has been confirmed to TMR however that CMI's financial difficulties are "significant" and "wider than the rent issue".

CMI supplies 23 different parts to Ford, mostly suspension components, delivered to Ford under a 'just in time' production system.

Ford Australia, of course, needs a speedy resolution to the issue if it is not to face protracted disruption to its vehicle assembly operations.

It needs CMI back in business for at least 24 hours before it can crank its production lines back into life.

Clearly to protect itself from hostile action from creditors, CMI this week chose voluntary administration, appointing administrators GrantThornton.

Ford Australia, a secured creditor, has appointed receivers McGrathNicol.

What is unknown, and what the administrators will be charged to discover, is the actual position of CMI across its operations.

Besides its Campbellfield facility, it operates plants in Footscray, Ballarat and Horsham as well as Toowoomba and Bundaberg in Queensland. Its fully-owned New Zealand subsidiaries are not subject to proceedings.

Muddying what is clearly deeper and wider difficulties than a difference of opinion over rent are AMWU claims that the landlord was demanding more money than was due.

The union had become involved in trying to resolve the dispute between CMI and its disgruntled landlord through a Fair Work Australia conference.

That Ford Australia has provided financial assistance to CMI in the past however would indicate that its supplier has been in some difficulty for some time.

It is against the law to trade insolvent. What the receivers find will determine both CMI's fate and the likelihood of any ongoing disruption to Ford Australia production lines.

Should CMI be forced to fall, finding an alternate supplier will not be easy for Ford Australia. According to Ms Phipps, "Ford's priority is to get CMI back. Our preference is to work with CMI, that's why we've appointed the receivers."

Ms Phipps confirmed however that Ford is investigating alternate suppliers, both in Australia and overseas, in case CMI falls.

Additional information:

Voluntary Administration allows a business to continue to legally trade when facing insolvency (ie. unable to pay debts when due).

Choosing Voluntary Administration protects a company from being forced into administration by hostile creditors who can initiate wind-up proceedings.

The Administrator acts on behalf of creditors while options are considered: the injection of funds, sale or break up or closure of the business, or, if feasible, to trade out of difficulty.

The Receivers' role is to take control of the business in receivership and of its assets.

 
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