Cat Logistics acquires MG Rover parts business
Caterpillar Logistics Services (‘Cat Logistics’), the logistics subsidiary of the US multi-national, has announced that it is to take over the spare parts business of struggling UK car manufacturer, MG Rover. The deal is worth in excess of £100m (€150m) in cash with an on-going profit share agreement and is likely to be completed in the next six weeks. The injection of capital is expected to be used to help fund the development of new models, and the car maker has the option of buying the operation back from Cat Logistics in four to five years.
Cat Logistics has been handling MG Rover’s parts business since 2002 from its Desford facility in the UK. It currently employs 390 staff dedicated to the contract, supplying parts for around 2.5 million cars worldwide. The operation includes the sourcing, marketing, distribution and sale of automotive service parts and accessories.
Although the partnership between Cat Logistics and MG Rover has developed strongly over the past two years, there were well publicized problems at the outset of the original ten year contract. There were difficulties related to the transition from its former logistics supplier Unipart to the new provider largely caused by the loss of experienced and skilled employees prior to the hand over. The resulting bottleneck forced the shut down of production at MG Rover’s plant to allow component manufacturers to drop-ship spares directly into the after market distribution network. At the same time Cat Logistics was forced to ‘parachute’ skilled logistics specialists from other parts of its organization to address the situation.
The scope of the existing contract already takes in much more than just distribution. Cat Logistics is responsible for buying, stocking and scheduling parts and negotiating with suppliers as well as managing forecasting and product pricing. It also prepares new electronic parts catalogues and runs a call centre. It would therefore seem a natural evolution for Cat Logistics to purchase this part of MG Rover’s supply chain, especially given that it is presently running profitably.
