One automaker takes control of another. They promise huge gains in sales and production. Investors respond enthusiastically. The market sours. The plans evaporate. The investors are left holding the bag.
Sound familiar? The scenario is the basis for investor Kirk Kerkorian's $8 billion lawsuit against DaimlerChrysler AG.
That also is what occurred 14 years ago when Chrysler Corp. purchased Italian supercar maker Automobili Lamborghini S.p.A., vowing to make the brand roar.
Chrysler's promises never came to fruition, and former British retailer David Jolliffe has used the U.S. courts to recoup his investment in a Lamborghini distributorship.
On June 22, a Superior Court jury in Wilmington, Del., agreed with Jolliffe's argument that Chrysler had failed to live up to its bullish 1987 promises for Lamborghini and socked Chrysler with a judgment equal to $2.6 million, including court costs.
A DaimlerChrysler spokesman said the company will appeal the ruling, adding that attorneys for the former Chrysler Corp. had been unable to present key evidence in the case. He declined to reveal the nature of the evidence.
The judgment was for slightly more than 1 million British pounds (not including court costs), or roughly the figure Jolliffe claimed his company invested in a new Lamborghini retail operation outside London in reaction to Chrysler forecasts. At the time, Jolliffe claimed to be the largest Lamborghini distributor in the world.
Jolliffe filed suit against Chrysler in 1994, after it sold Lamborghini for $40 million to a group of private Indonesian investors. Germany's Audi AG now owns the Italian brand, whose sports cars retail for more than $250,000.
Chrysler acquired Lamborghini in 1987, when the U.S. market was booming and Chrysler was distancing itself from its deep financial troubles of the late 1970s and early 1980s.
According to the lawsuit, shortly after taking over Lamborghini, Chrysler revealed it intended to expand the model line with a less expensive model, called the P140. With that product, Chrysler management said, the company believed it could boost sales of the Lamborghini line from about 350 cars a year worldwide to as many as 3,000 within five years.
Encouraged to grow
Jolliffe claimed company officials encouraged him to invest in a bigger operation to prepare for the growth. His 15-year-old London boutique dealership had been an 800-square-foot store that catered to wealthy British rock stars and business executives, selling about 30 cars a year.
Jolliffe and his financial partner, David Lakeman, claimed they responded by investing about 1 million British pounds buying property outside of London, building a store and hiring more staff in anticipation of the sales growth.
But according to court testimony, Chrysler management began backing away from its initial statements about Lamborghini. As the U.S. economy slipped back into a recession in the early 1990s, Chrysler shelved the P140 plan and quietly put Lamborghini up for sale.
According to Michael Connolly, the Boston attorney who represented Jolliffe in the lawsuit, the increase in Jolliffe's overhead and the lack of new product forced him into bankruptcy.
Said Connolly: 'Now he's ruined.'