Rico to foreclose Ford Motors deal

Firm to pay $2 mn as settlement amount

Automobile component manufacturer Rico Auto has decided to foreclose a deal with Ford Motor Company under the preferred supplier programme for Ford's global operations and pay $2 million as the settlement amount over the next two years in eight installments.

Rico Auto's management said this was not a penalty but money it owed as commission to Ford for supplies already made under the programme.

Rico's Managing Director Arvind Kapur said the company had this decision on its own taken to avoid further loses.

"We were supposed to get a preferential treatment under the said programme. But in the end of it, we were only adding the commission to the price we quote for our order to Ford globally, making it less competitive."

He clarified Rico Auto would continue to pursue big orders from Ford worldwide directly. The supplies would be for both Ford as well as its tier-II suppliers in Asia.

"It was a 10 year contract worth $12 million this year, $18 million for the next year, and expected to scale up to $25 million in the years to come. We had only curtailed losses by opting out of the preferred supplier programme," he added.

The contract was signed in April 2003. Kapur said the money could be paid to Ford Motor Company or Ford India. "It does not matter who we pay the money to. As far as we are concerned, we are going to pay in rupees," he added.

Rico Auto manufacturers around 200 auto components, including some critical engine and transmission parts.

Ford India officials, however, could not be contacted for further clarifications.

Kapur said this was not a set back for the company and it continued to bag large orders from global auto majors like General Motors and others.

"Besides executing the ferrous and aluminium business already finalised, the company would continue to participate in the upcoming projects of Ford and its global affiliates across North America, Europe and India," Rico said.

On the expansion front, he said Rico was looking at setting up greenfield units and acquisitions outside the country as well.

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What Rico says

• Amount not a penalty but money it owed as commission to Ford
• Foreclose decision taken to avoid further losses
• Rico curtailed losses only by opting out of the preferred supplier programme
• Company would still continue to pursue big orders from Ford worldwide directly
• The supplies would be for both Ford as well as its tier-II suppliers in Asia
• Money could be paid either to Ford Motor Company or Ford India
• Rico still continued to bag large orders from global auto majors like General Motors