Motor vehicle dealer CMC Motors has terminated the controversial contract with logistics company Andy Forwarders in an ongoing business restructuring program.

This comes hot on the heels of accusations that the logistics firm had been over billing CMC, putting a huge burden on its operational costs.

Speaking to Capital Business, CMC Motors Chief Executive Officer Bill Lay said the company tendered for new logistics providers where SDV Transami and Damco were picked.

“For a well run company, you should always tender for these things on a regular basis and have one or two suppliers in case there is a problem with one of them,” Lay said.

He said the decision to go with two logistics firms, with a possibility of a third, is based on the dynamism to leverage on credit extension facilities the two bring in helping in the clearing, forwarding and distribution of its imports.

“One of the facilities you need when you have a clearing and forwarding agent is that sometimes it’s a good idea that they can pay your taxes, import declaration fees and duties. There weren’t many of them that could provide Sh200 million in credit to allow you to bring in your products, that’s why we went for two,” Lay said.

Andy Forwarders, one of the largest locally-owned logistics firms, is said to have made improper billings to the tune of Sh2 billion to CMC. There were also issues of conflict of interest in that it’s Chairman and CEO Peter Muthoka was at the time the chairman of the CMC Board.

This led to his subsequent ouster as CMC chairman, sparking a new wave of boardroom wrangles as he seeks to regain control of the company. Andy Forwarders is the largest shareholder in CMC with a 24.7 percent stake.

Lay said under the current arrangement, SDV Transami will provide sea freight services while Damco will provide air freight solutions to CMC.

CMC imports more than 2,000 units of vehicles ranging from Mazda, Volkswagen, Range Rover to heavy farm machinery making it one of the biggest customers of logistics services in the country.

Lay said that the CMC management was also looking at finding new ways of reducing operational costs within the organisation.

The termination of the Andy Forwarders is likely to further fuel the boardroom tension that has gripped CMC. Muthoka has already called for an Extraordinary General Meeting seeking to have Lay removed as CEO as well the removal of three other directors.

The matter is currently before the courts after the Capital Markets Authority sought to block the EGM arguing it would interfere with ongoing investigations in the company.

A hearing has been scheduled for November 9.