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Dispute With Distributor Continues to Keep Mahindra Out of U.S.

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Dispute With Distributor Continues to Keep Mahindra Out of U.S.

By Byron Pope

WardsAuto.com, Nov 24, 2010 9:00 AM

The feud between distributor Global Vehicles U.S.A. Inc. and auto maker Mahindra & Mahindra Ltd. is growing more contentious by the day, and no solution appears in sight.

The argument, which continues to keep Mahindra vehicles out of the U.S. market, stems from a series of long delays in delivering a small diesel pickup produced in India.

Alphareta, GA-based Global Vehicles, earlier inked a deal to be the sole distributor of the 2- and 4-door trucks, but Mumbai-based Mahindra continues to refuse to ship the vehicles, contending its contract with the distributor has expired. Global Vehicles has turned to the courts to end the stalemate.

“Originally, it was 2008, and then it was moved to September 2009,” Global Vehicles CEO John Perez tells Ward’s. “And then it moved to March 2010, and then September 2010.”

Perez says the delay has put thousands of jobs in jeopardy.

“We are ready to sell trucks, and that remains our goal,” Perez says. “By our calculation, Mahindra’s delays and disruptions are putting more than 8,300 potential jobs at risk at our dealers, at the ports, in the trucking industry and throughout the supply base.”

Also at stake is the $35 million Global Vehicles paid Mahindra for exclusive distribution rights for the pickups and spent on product and brand development, as well as dealer and administrative costs. The importer represents 347 U.S. dealers who put up a large portion of that money.

Perez says numerous attempts to contact Mahindra to work out the dispute have gone ignored.

U.S. debut of Mahindra & Mahindra small diesel pickup delayed.

Shipments were delayed initially because diesel engines had not passed U.S. emission standards, but the trucks now are certified.

The latest order, worth $35 million and placed in September, was “improperly rejected” by Mahindra, Perez contends.

“We placed this substantial order in good faith, because we want to get down to business and so do our dealers,” he says, noting some 30,000 “hand-raisers” have expressed interest in purchasing the truck.

A Mahindra spokeswoman declines comment, instead pointing to an earlier press release issued by the auto maker in which it disputes Global Vehicles’ allegations.

“Mahindra views this order as another example of Global Vehicles’ policy of engaging in PR theatrics while pursuing an unnecessary lawsuit,” the auto maker says. “This is Global Vehicles’ continued attempt to manipulate the press to damage Mahindra's reputation.”

Perez alleges Mahindra all along planned not to honor the contract, citing the auto maker’s insistence that a last-minute addition to the original contract be made.

The added clause, which Perez refers to as the “famous clause 10,” stipulates the agreement would be null and void should the pickups not receive U.S. certification prior to June 11, which was the last deadline set by Global Vehicles after extending the original certification date three times.

Perez says Mahindra deliberately delayed the certification process until the clause went into effect, announcing Aug. 20 the vehicles were certified for sale.

“Ten days after (the clause) went into effect, they applied for certification and got it,” he says.

Global Vehicles has a federal suit in Georgia to determine whether Mahindra is violating its contractual rights.

Additionally, a request for arbitration was filed by Global Vehicles in London, considered a neutral site for settling the disagreement.

Perez says Mahindra has breached distribution contracts with others in a similar fashion.

“They’ve done it in South Africa, Australia and Italy,” he says. “They signed up distributors, let them set up (the distribution channel) and then took over. Big auto companies have ways to squeeze small distributors like us out.”

In statements, Mahindra does not directly address Global Vehicles’ allegations, but does say it is seeking another avenue to bring its pickups to the U.S.

“Mahindra believes that this is an attempt by Global Vehicles to distract Mahindra from pursuing other plans to bring its vehicle to the U.S. market,” the auto maker says. “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.”

Despite the ongoing dispute, Perez still hopes the two sides can come to an agreement and Global Vehicles can start retailing the pickups.

“The product is a great product and has a great future in this country.”

There’s no timetable yet for when the Global Vehicles lawsuit, filed in an Atlanta federal district court, will be reviewed.



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