Depa, the interior design company, is requesting that sub-contractors on the Ferrari World project take a 10 per cent cut in payments.
Depa asks for Ferrari discounts
Sub-contractors on the Ferrari World project say that the interior contractor, Depa, has been asking them to reduce their bills to the company by as much as 10 per cent.
Mahmoud Yousif, the general manager of Specialised Metal Design in Dubai, said a consortium he was working with was given an offer by Depa, based in Dubai: accept a discount and get paid immediately, or wait and eventually get paid in full. "In order to get cash now, I have to give a discount," he said. "When you really need money and are short of cash, you will give the discount immediately."
This situation (of being asked to reduce bills) had proliferated across the UAE in the past year, he said.
The negotiations between Depa and sub-contractors are similar to those that have taken place across Dubai and the wider region as property developers faced cash-flow problems after the downturn. Many companies accept the discounts because they need cash to continue operating.
Depa declined to comment on specific arrangements with contractors yesterday but said negotiations over payments were an industry standard in the depressed market.
A Depa representative said: "We don't comment on private discussions between us and our sub-contractors. Depa is paying its sub-contractors. However, price negotiations and reviews on variation orders are common practice in our industry, particularly given the state of the current global economic climate."
Aldar Properties is the overall developer of Yas Island, including Ferrari World. The company is expected to announce a funding arrangement from the Abu Dhabi Government by the end of the year. It has more than Dh10 billion (US$2.72bn) of debt coming due next year. Aldar yesterday declined to comment on the arrangements between Depa and its sub-contractors.
Depa won the Dh200 million contract to fit out Ferrari World in August last year in time for its opening last month in conjunction with the Formula One grand prix on Yas Island.
Another contractor who worked on the Ferrari World project, who declined to be named, said he took a 10 per cent cut on his overall contract.
"The point to be made is that as a small to medium-sized business, I am not interested in taking big jobs like this any more," the contractor said. "If my profit margin is not substantial, then I can make the same money with much smaller jobs that have less headaches."
Depa reported a Dh103m loss for the first half of the year in August, compared with a profit of Dh92m in the same period the year before.
*This story has been modified from the original