Volvo warning on Paris bill payment move
Volvo, the second biggest truck manufacturer of the world has issued warning to the French government not to go ahead with the legislation which will force companies to pay their suppliers quickly. This will erode France’s industrial base. The Swedish group is threatening to review supply policy if French government passes the bill limiting delays in payment to suppliers by 60 days.
Mikael Bratt, finance director of Volvo, said that their cash conversion cycle being longer, they prefer longer payment terms. French suppliers, if interested in retaining the business with Volvo, will have to take effective measures in other areas.
The French government is of the view that country’s bill- paying average of 67 days against Europe’s 57 days, is impeding development of smaller and mid-sized export companies due to non availability of timely finances. Government is estimating availability of €4bn ($6.16bn, £3.12bn) per year for reinvestment in growth by reducing average delay in payments from 67 days to 60 days.
The legislation, being tabled in parliament this month, is aimed at economic modernisation. After the parliament’s approval, it will compel the Government to settle its own bills within 30 days.
Volvo, buys material about €4bn) a year from France. It has resolved the delay issue through a supply-chain financing scheme with financial intermediary PrimeRevenue of the US. It strongly feels there is no need to introduce new legislation. According to Burno Linsolas, Volvo wants their suppliers to grow with them.
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