Land Rover warned last night that production of its Discovery model could be suspended for up to nine months and more than 10,000 workers laid off if it fails to settle a legal dispute swiftly with the receivers acting for the insolvent parts supplier UPF-Thompson.
Accountant KPMG, the receiver, countered that 700 jobs at UPF-Thompson, which supplies chassis for Land Rover, could go to the wall unless it persuades the Ford-owned company to pay substantially more for this key component.
The dispute, accompanied by unusually aggressive threats on either side, is being watched with keen interest throughout the car industry as other companies, notably Vauxhall and DaimlerChrysler, could soon become involved.
Loss-making Land Rover, bought by Ford from BMW two years ago, is struggling to meet its target of trading profitably this year after investing heavily in the new Range Rover. It is said to be losing about £170m a year.
It said it could be forced to lay off 1,400 employees working on Discovery, the company's second best-selling model after Freelander, without a settlement.
Last Friday it won a court injunction forcing UPF to continue to supply chassis until January 25. But officials said stocks were only enough to cover 48 hours without regular supplies.
The Land Rover contract provides 65% of UPF's business, which collapsed because of mounting debts caused by the failure of a German subsidiary, Meckenstock, and the unsustainable cost of a US unit set up to supply a new General Motors truck.
Land Rover, which insists its contract is in no way responsible for UPF's debts, said it had already paid the stricken supplier several million pounds in goodwill gestures; Vauxhall, part of GM, has done the same.
But, a Land Rover spokeswoman said, the demands made by KPMG - amounting to £45m - were several times more than the original contract was worth.
"We believe the receivers have been acting in an unacceptable manner and making extraordinary demands."
Expressing hope for a negotiated settlement, she warned that 200 small firms in the west Midlands supplying Land Rover and employing 10,000 people could be forced out of business without one. It would take six to nine months to reach a deal with a new supplier.
KPMG, in turn, accused the Ford-owned business of seriously under-valuing the contract. Mark Orton, the receiver, said he had a legal duty to obtain the best price for UPF's business and to protect the company's future.
KPMG is relying on the precedent of Ford supplier Transtec, which also went into receivership and won court backing for its demand for a new five-year contract worth 60% more.
