Unilever ready to shun suppliers who ignore year 2000 computer threat

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The Independent Online
Two of Britain's largest companies issued stern warnings yesterday about the potentially devastating impact of the millennium bug on computer systems.

Unilever, the Persil detergents and Flora margarine consumer goods group, warned its smaller suppliers that they could be de-listed if their systems were not millennium compliant by spring next year. The company has already said that it will cost pounds 250m-pounds 300m to ensure that its own systems will function effectively through 2000.

Reuters, the media and information group, revealed it would cost pounds 73m to prepare its dealing and information screens for the year 2000. It spent pounds 11m on fixing the bug last year, and it expects the programme to cost a further pounds 31m this year. Although it has set a target of fixing all its systems by the end of the year, the company thinks it will have to spend a similar amount solving last-minute problems in 1999.

To make managers address the issue, Reuters plans to adjust senior executives' bonuses depending on whether they meet targets for fixing systems.

Rob Rowley, finance director, said pounds 73m was the additional amount Reuters had to spend to fix the bug. The company is also devoting a large amount of existing resources to the issue. This year alone, it expects in-house staff to spend 725 staff hours tackling the problem.

At Unilever, Niall FitzGerald, the chairman, said: "We are concerned that not all our suppliers are giving this issue adequate attention." He said the lack of awareness was most acute among small and medium sized enterprises.

In a stark warning to the group's supplier base he added that companies who by spring 1999 still did not know whether their systems would operate effectively in the 2000 would find themselves in "a suspect position" in their relationship with Unilever.

He was speaking as Unilever reported flat profits on continuing operations of pounds 2.5bn. This excludes a pounds 2.9bn exceptional profit on the sale of its speciality chemicals business to ICI last year. Mr FitzGerald said the turmoil in the Far East had not had a material effect on the business last year but would hit the group in 1998. However, he added that it may provide scope to make acquisitions of distressed companies in the region. The strength of sterling cost the company pounds 200m last year.

Mr FitzGerald refused to be drawn on his plans for the group's pounds 3.2bn cash pile. He repeated that the company's strategy was to use the funds to acquire businesses in its key product markets of food and personal care in developing markets.

Investment column, page 23

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