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Recent economic surveys have highlighted the resurgence of the vehicle manufacturing sector in the UK and the important role played by the West Midlands region in that resurgence.
The legal issues that confront those businesses engaged in this sector are not of course unique but particular issues do present themselves more frequently and it is important that appropriate advice is taken at an early stage which is tailored to the needs of those involved in the industry.
At George Green we act for a number of businesses in this sector, ranging from those engaged in cutting edge product development to those supplying components and pressings for the vehicles themselves and a number of common problems arise.
For those involved in the area of product development intellectual property issues loom large. Many projects are undertaken collaboratively between suppliers and the vehicle manufacturer and it is vitally important that proprietary intellectual property being contributed is correctly identified and labelled to ensure existing protections remain. The rules as to ownership and the use of any intellectual property which may be developed as a result of the collaboration also needs to be agreed upon to avoid disputes later.
Many of the people engaged in this cutting edge work prefer to work as contractors through agencies rather than being tied to one employer. This, again, raises issues in relation to ownership of the intellectual property. As employees any intellectual property produced in the course of their employment would be owned by their employer but this is not the case with independent contractors and contracts need to make specific provision for this.
Liability and Payment Terms
For many component suppliers, however, the key legal issues revolve around limitation of liability and getting paid. One of our clients, for example, supplies and develops brake pad linings for several manufacturers. The potential consequences of product failure in this context are obvious and damage and loss may far exceed the sales price of the component itself. Conventional terms of business which seek to limit liability to the price of the product may not be acceptable to the manufacturer here. Close liaison between us as lawyers, the client and product liability insurers, however, resulting in the client being able to propose a solution to the manufacturer which met industry norms but were still cost effective from the insurance standpoint and gave the client the protection it was seeking.
Similarly, many manufacturers do not operate normal 30 day payment terms. This creates issues in terms of funding for working capital and payment of suppliers and subcontractors. George Green has relationships with many banks and other sources of alternative funding and we have been able to assist many clients in this area by drafting payment terms which need to meet manufacturer’s criteria but which are still robust enough to satisfy the demands of invoice discounting/factoring companies and other such providers.
Environmental Regulation
All vehicle manufacturers are now obliged to ensure that the components which make up their vehicles are recyclable. This even extends to the tyres! Current environmental rules can be a legal minefield. However, George Green has clients who are engaged in the recycling and environmental disposal of whole vehicles and many of such components and we are able to advise in relation to such matters with the benefit of industry expertise.
Sector specific knowledge is crucial when seeking or delivering commercial legal advice in all areas of business. In the automotive industry, it is no different. Here at George Green we reckon that we are close to being able to source the components for our own car solely from our existing clients, but quite it might look like is another matter! Seriously, however, this is an area where detailed sector specific advice is a must.