Rolls-Royce sues engineers for £45m over 'faulty' engine

Aerospace giant Rolls-Royce is suing Ricardo, a small engineering services firm, for £45m in losses it allegedly incurred on a faulty Allen 5000 diesel engine.

Aerospace giant Rolls-Royce is suing Ricardo, a small engineering services firm, for £45m in losses it allegedly incurred on a faulty Allen 5000 diesel engine.

The engine is understood to be have been sold to a mining firm in the late 1990s but had to be recalled after the faults were discovered.

Rolls-Royce set aside a provision of £35m in 2001 to cover the cost of the recall. The amount also covered the cost of recalling another faulty engine, an A601 small gas turbine, which was also sold to a mining firm.

But Rolls-Royce is now seeking to recoup the loses it made on the Allen 5000 engine and has launched the claim against Ricardo, an engineering services firm based in Shoreham-by-Sea, West Sussex. The group counts the Jordan Formula One racing team among its clients.

It is understood Ricardo was contracted by Rolls-Royce to design and build part of the engine, and it is alleged that the work carried out by Ricardo contributed to the engine's problems.

In its most recent annual report, Ricardo said it had been notified of a "potential claim relating to work performed for a non-automotive client, which purports to have suffered losses of approximately £45m". The group, with a market value of £172m, said it believed it could successfully defend the claim and has not so far set aside any provision.

City insiders say Ricardo has professional indemnity insurance that would cover some, but not all, of the claim should Rolls-Royce succeed.

Ricardo is well respected in the City. Despite the slowdown in the global automotive sector, the group has performed well and its shares have risen from 278p at the start of this year to well over 300p. On Friday the stock closed at 347.5p.

Rolls-Royce declined to discuss the case or comment on why it was seeking around £45m in damages.

A company spokesman said: "As this is a subject of legal proceedings, there is nothing we would like to add at this stage."

Rolls-Royce still makes the Allen diesel engines, which are used to power large outfits such as mines, factories and even remote villages.

Ricardo refused to discuss the case.

A court date has yet to be set as the two sides are currently locked in discussions about the claim.