Rio Tinto has caved to pressure against its plans to extend payment terms for suppliers.
Affected suppliers directly lobbied Prime Minister Malcolm Turnbull, during his recent visit to the Pilbara, to push Rio Tinto to take back their controversial decision to extend payment terms from 45 to 90 days.
Resources minister Josh Frydenberg said he asked the miner to “re-examine” the payment regime change, prompting a decision on Wednesday evening, according to AFR.
‘While in the Pilbara this week, a number of Australian companies raised with the Prime Minister and me Rio Tinto’s decision to change its payment terms from 45 to 90 days for existing and future suppliers,” Frydenberg said.
“This clearly puts cash flow pressure on smaller suppliers and their business operations. I spoke to senior management at Rio Tinto and conveyed the government’s concerns and asked that they re-examine their decision, taking these considerations into account.”
The payment regime change applied to supplier contracts greater than $3.9 million, however smaller suppliers faced an increase in payment terms from 45 to 60 days.
With terms of 45 days, paid at the end of the invoicing month, suppliers still face up to 76 days waiting for payment from date of invoice.
A spokesperson for Rio Tinto said the changes had not been easy decisions to make, but the reversal applied globally.
“[The] decision to ask our suppliers to share some of the burden has not been taken lightly and we have endeavoured to reduce the impact where we can,” he said.
“We value our partnerships with our suppliers and their feedback, so we have taken the decision to maintain our payment terms for those suppliers with contracts in place, as they were at March 30.
“To ensure full transparency, future arrangements with our suppliers will be negotiated as part of any discussions about new contracts to maintain the competitiveness of our business and our future ability to develop our assets.”