I st THE EMPLOYMENT TRIBUNALS CASE NUMBER: 1402867/2006
BRISTOL
B E T W E E N:
MR BRIAN LITTLE
Claimant
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(1) MAGELLAN AEROSPACE (U.K.) LIMITED
(2) MAGELLAN AEROSPACE CORPORATION
Respondents
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WITNESS STATEMENT OF JIM FAIRBAIRN
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I, Jim Fairbairn, 17 Langthorn Close, Frampton Cotterell, Bristol BS36 2JH will say as follows:
1. I started work for British Aerospace in 1976 in a commercial/contracting role. In 1989 I moved to Airbus UK. In November 2003 I moved into the Airbus “details area of Procurement” working for Dave Micklewright and Mark McIntyre in a commercial role. I retired from Airbus in September 2008 and now have a retainer consulting role on a part-time basis with MALUK.
2. I first met Brian Little very shortly after I moved into Airbus Derails Procurement in January 2004. When I started the “old” Mayflower Aerospace contracts were all short term orders and the A380 contract was unsigned. MALUK were also now the preferred bidders for Moores at Bournemouth. Airbus wanted someone to buy Moores to save a very messy insolvency which would damage Airbus supply lines. Brian and a Canadian colleague Mr Larry Winegarden then negotiated on several occasions an MOU and three new long-term contracts with David Smith and myself. These were completed and ready for signature at the end of March 2004. I remember the “showstopper” or difficult issues included a Magellan Corporation Parent Company Guarantee. I distinctly recall Mr Winegarden stating that Magellan would not provide a Parent Company Guarantee and would only provide a limited financial performance guarantee. After multiple iterations this Deed of Guarantee was eventually signed by Mr Neill and Mr Dekker. It was however provided before Mr Micklewright would sign the remaining contracts with Mr Little. Throughout all my dealings with Brian, and indeed the Magellan team, I have always found that they have tried to do the best for Magellan recognising the issues that Airbus had too.
3. When I joined this Airbus Details Procurement Group I also became aware that certain undertakings with regard to supplier debt default had been given to All Metal Services and Apollo Metals during 2003. These verbal undertakings by Mr Micklewright, and/or Mark McIntyre on behalf of Airbus, were now required to be extended in writing by myself and progressively during 2004 these undertakings finally ceased.
4 Airbus wished to have a rib design and manufacturing capability in the UK and by early 2004 my Engineering colleagues considered that MALUK had now in place a comprehensive engineering skills and experience capability. Despite this they were unable to get the overall commercial/pricing terms competitive for the design-build package on the A400M metallic ribs. By mid 2004 we awarded this package to Mecachrome and MALUK faced a rapid decline in their engineering workload. It was also identified by my colleagues that there was a skills/experience deficit within Clairis/Mecachrome and Mr Pinner and the A400M project team began to work to have MALUK engineering support Mecachrome and help address the identified skill shortage at Mecachrome. This was put in place by September/November 2004 and supported by Airbus commercially. I was party to the initial drafting of Document 817/818 which was also entered into by Airbus UK, and signed by Mssrs Pinner, Gray and Micklewright for Airbus and Mr Little for MALUK.
5. As this was happening in engineering I was very aware of delivery performance issues in Manufacturing both in MALUK North and in particular at MALUK Bournemouth. Whilst these manufacturing delivery supply problems were worsening MALUK was bidding for the major HdeH ribs package.
6. This HdeH package of work had to be resourced by Airbus by the end of 2006 as HdeH were closing their facility in Australia. Airbus wanted to have the manufacturing control in the UK and also wished to ensure that CAV was a part of any contract. CAV already made some of the ribs as a sub contract to HdeH and their involvement would reduce the risks involved in the work transfer. Airbus finally decided to place the total contract with MALUK in their “supplier consolidator” role with CAV acting under Magellan. This fulfilled part of the Airbus obligation made in MOU1 in April 2004 for the new Business reservoir. It was also a major concern that all the production engineering /NC programming work could be carried out in the timescales and MALUK subcontracted a small portion of the work to Huddleston’s and Moyola in Northern Ireland to mitigate risk. I drafted The HdeH rib package ITP that was sent to Mr Little by Mark Preddy for these metallic ribs on 14 December 2005 (Document 1188/1191) after the joint Senior Business Review.
7. In early December 2005 Mr Little had some direct discussions with Mr Dave Micklewright on price increases amounting to over £1.5m per year extra cost to AUK from January 2006 . Mark McIntyre and Mark Preddy briefed me about this after the Senior Business review in mid December and I wrote the draft MOU2 as a result of those conversations. I had no discussions with Brian before sending him my MOU2 draft attached to my email 19 December 2006. These are at document 1226 B-H. I had several inputs into the draft during mid December from my Airbus colleagues. There was a definite level of resentment within Airbus when we were placing new work and also discussing increasing prices at the same time as Magellan UK were seen as a “failing supplier”. “MOU2” died early in 2006 as it was suspended and then ultimately replaced by various other agreements and arrangements later in 2006.
8. In January 2005 AUK were requested by Airbus Toulouse to obtain further NRC amortisation funding on A380 covering the cost of any additional work. Design-build suppliers were all targeted so as to minimise the cash outflow from Airbus. Magellan UK and Airbus took some twelve months to finally agree this and I signed it on the 20th January 2006 (document 1332). One part of this agreement was that Airbus would reduce payment timescales and that the settlement terms would reduce from 60 days to 40 days and from 90 days to 60 days for the A380.
9. Magellan were invited to bid for work on the A350 ribs and also for the Inner Rear Spar. This work was placed in abeyance whilst Airbus reviewed the A350 project.
10. In late 2005 and early 2006 AUK wanted much more action from MALUK and Canada to address the operational performance as we had major delivery delays. In particular Airbus senior managers had been promised in mid December 2005 more support from Canada including Mr Butyniec’s personal involvement on a regular basis. Every internal Airbus meeting I attended for the next few months had these operational issues raised. I recall Mr Butyniec eventually came to the UK in March 2006 for the majority of his time for some three months. I met him on a number of occasions while he was here.
11. Magellan requested an increase in price on 77 parts. These price increases discussions started in December 2005 – February 2006 between Mr Micklewright and Mr Little were suspended in February 2006 and then restarted in early May 2006. This time initially Mssrs Underwood and Martin came to a meeting in Airbus where a number of actions were agreed. These included reviews of the parts with our estimators, bids from other suppliers to confirm the reasonableness or otherwise of the prices. Additionally there were separate discussions on price increases on parts made from titanium as raw material costs rose substantially. Airbus was also determined to ensure that a serious cost and then price reduction programme was underway to offset the price increases.
I recall a discussion in early July after Mr Little returned to lead the negotiations when he was pressing for the final price corrections to be back-dated to January 2006 – that is to the original intent of MOU2. Airbus stated that it was not prepared to consider back dating to January because of the costs incurred by Airbus caused by Magellan’s performance. It was prepared to consider from April and this would have incurred a cost to Airbus of some £379k for the second quarter, Prices on the orders were amended to the agreed higher prices from 1st July. Airbus insisted that we would not pay more than £200k for the second quarter as there were significant real costs for the delivery delays and liquidated damages. Airbus agreed to accept an invoice for £200k in the period April – June 2006 and dated 30 June 2006.(document 1869 refers) but with a waiver of its rights to claim Liquidated damages.
12. On 26 July 2006 I sent a letter to Mr Little with our proposed agreement terms (document 1942). In the meantime Mr Little was pressing for early payments. Mr Neill wrote an email to me regarding the delay in finalising the agreement on 2 August 2006 (document 1954) and indicating that the Magellan Corporation were reviewing my draft terms letter carefully as they had not met previous targets. I replied on 3 August 2006 (document 1958) in my frustration questioning what exactly Magellan was now doing. It seemed to Airbus that we had met all our contractual requirements, had awarded several work packages and were now being asked to pay the entire 100% of the requested price increases for those 77 parts. I understood there were still delivery problems and it seemed no real commitment to a cost/price down strategy. After some further changes and iterations between Brian Little and myself the agreement was finally signed on 9 August 2006. I also sent an email to Brian Little on the 10 August 2006 (document 2013) emphasising the importance of confidentiality on the price increases as the general market /commercial approach from Airbus had been price reductions. I concluded that this agreement meant that Magellan seemed to be coming out of this much better than Airbus.
13 I remember trying to push some payments through as I was going on holiday for a fortnight on the 18th August 2006, the delay in signing the agreement and the associated administration meant this could not be achieved before I left. I was able to get some of these invoices processed on a special payment basis in mid September 2006. I recall the email at Document 2120B from Mr Little.
14 When I saw the Announcement regarding Brian departure from Magellan I was “amazed”. It was a total surprise and we all wondered what had happened.
15 No-one had said to me about “whistleblowing” and this case until May 2008 when Brian contacted me directly regarding being a potential witness to give evidence on some of the respondent’s allegations (my MOU2 drafting) and the general situation / history now that he was aware of my planned retirement.
The contents of this witness statement are true to the best of my knowledge and belief.
Signed:…………………………...... Date: 31 October 2008
Jim Fairbairn
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(22201739.03)