India's Mahindra & Mahindra Ltd. said it has terminated a four-year agreement with its independent U.S. importer, Global Vehicles U.S.A. Inc., just days after receiving a key U.S. government approval to sell its small-engine diesel pickups in the United States.
The certification from the EPA last week came after repeated delays in the launch date.
Mahindra posted news of its break with Global on its Web site today.
In a statement Thursday, Global called the claim “inaccurate.”
Global acknowledged that Mahindra has attempted to terminate the agreement, but warned that “such attempted termination is invalid under applicable laws of the United States and the State of Georgia, something which Mahindra continues to disregard.”
Global has been battling Mahindra in court to prod the Indian company to commence U.S. operations.
In a separate statement issued Thursday to Automotive News, Global Vehicles spokesman Max Butler said the company intends to begin selling Mahindra pickups and is “in the process of taking orders and updating all floor plan agreements in anticipation for Mahindra to provide Global Vehicles with the initial production date.”
The statement by Mahindra hangs a question mark over the 300 to 350 U.S. retailers who have signed franchise agreements directly with Global Vehicles, if the Alpharetta, Ga., company no longer is the distributor.
Nor is it clear that Mahindra has the power to terminate the agreement without a court fight.
Retailers have showrooms
Some U.S. retailers already have procured showrooms to sell the Mahindra pickup, which was scheduled to launch in December pending EPA certification.
Global CEO John Perez, a former auto dealer, has spent the past four years coaxing Mahindra into the U.S. market. In legal documents filed in June, Global said it had spent $35 million to prepare for Mahindra distribution.
Mahindra originally targeted mid-2009 to launch U.S. sales but delayed the project after retailers and Perez asked for numerous product changes.
The market entry was then scheduled for December 2009, then postponed to February 2010 and postponed again until December.
In a conference call in June, Perez told dealers he was taking legal action against Mahindra through arbitration in the United Kingdom because he feared that the launch would be delayed again until after December.
In July, Global issued a statement that read: “In the litigation Global Vehicles seeks to compel Mahindra to honor its contractual obligations to obtain homologation of the vehicles and to begin shipping them pursuant to existing and long-standing orders placed by Global Vehicles on behalf of its many dealers.
“Global Vehicles and its dealers stand ready, willing and able to immediately begin selling Mahindra vehicles in the United States. All Mahindra needs to do is complete homologation and start delivering them. Thus any delay in entering the United States market rests exclusively with Mahindra and can in no way be attributable to the litigation or any actions of Global Vehicles.”
Mahindra's Web site now displays the following brief statement with quotation marks around it: “Mahindra's relationship with Global Vehicles Inc. [sic] (GV) has ended, the agreement dated 26th September 2006 between Mahindra and GV having terminated.”
A Mahindra dealer who asked not to be identified speculated that Mahindra has little choice but to use Global Vehicle's waiting network of retailers.
He said Mahindra's only real option would be to recreate a new dealer network, which would take months of legal and financial review.
“If they're still coming in December of this year like they've said they are, they're coming through my dealership, and that's all there is to it,” the franchisee said. “It's pay day time.”
Mahindra's pickup is equipped with a 2.2-liter, four-cylinder clean-diesel engine that the company says is now certified to comply with the EPA's stringent new emission requirements for diesels, known as Tier 2 BIN 5 standards.
Perez has been hoping to have the first four-cylinder diesel-powered truck on the U.S. market. The compact truck boasts a towing capacity of 5,000 pounds and a payload of 2,765 pounds.
Perez sought out Mahindra in 2006 after dropping plans to import a Romanian SUV known as the Aro. He had spent a decade unsuccessfully attempting to import that vehicle and had a network of U.S. retailers standing by when the plan ended.
Perez assured his U.S. Aro dealers that he would find them a different vehicle to import and allowed them to roll their Aro franchises into Mahindra franchises.
Other dealers have joined the network separately since then, paying up to $200,000 in franchise fees.