Lawsuit makes Mahindra trucks' US launch uncertain

AP News
Posted: Oct 15, 2010 2:46 PM
Lawsuit makes Mahindra trucks' US launch uncertain

A legal battle between India's Mahindra & Mahindra and its sole U.S. distributor has thrown into doubt its planned December launch of two mid-sized diesel pickup trucks in the United States.

Managing director Anand Mahindra said Friday the company now has "no date" for the U.S. launch. Regulatory delays pushed back earlier deadlines.

"We're still interested in getting into the U.S.," Mahindra said in an interview, declining further comment due to the legal case. "We don't want to turn this into a war of words."

The company's sole U.S. distributor, Global Vehicles USA Inc., maintains that Mahindra improperly terminated its contract in June after a failed takeover offer.

"The bottom line here is Mahindra now believes this is a huge project. They want us out of the way so they can go direct and save the money we were going to make," Global Vehicles chief executive John Perez said by phone Friday.

Global Vehicles filed a case in U.S. Federal District Court in Georgia on June 14, claiming that Mahindra had violated its contractual obligations and urged the court to block any other U.S. distribution of Mahindra products. It initiated arbitration proceedings on June 11.

The distribution agreement dates to 2006. Global Vehicles, based in Alpharetta, Georgia, says it has recruited 347 Mahindra dealers in 49 states.

Perez said his company has spent $57 million on the project and dealers have spent over $40 million more on upgrading their facilities in preparation for the Mahindra launch.

He said a team from Mahindra came to his office the week of June 11 to try and buy the company, which was created expressly to distribute Mahindra products in the U.S. He claimed the price offered was less than the $57 million already invested.

"When we first signed the contract with Mahindra, they thought this would be a small project in the States, maybe 5,000 to 6,000 vehicles a year," Perez said. "Our dealers can sell over 50,000 vehicles a year without any issues. Our dealers today have over $300 million in financing to buy Mahindra vehicles."

Mahindra maintains that the lawsuit is without merit as the contract with Global Vehicles expired on June 11.

"The contract with Global Vehicles has expired. In light of this fact, Mahindra will be contacting U.S. dealers to make other arrangements for distribution," Mahindra said in a statement. It also said Global Vehicles is trying to "manipulate the press to damage Mahindra's reputation."

Mahindra & Mahindra, India's largest utility vehicle maker, has been eager to expand overseas in an effort to transform itself into a top global SUV player.

It said in August that it had received environmental clearance to sell the two pickups in the U.S.

That month it also successfully bid for a majority stake in South Korea's cash-strapped Ssangyong Motor, in the hopes that Ssangyong's over 1,200 global dealerships and 5 brands would help it access new markets across Europe, Russia and Latin America.