Mahindra and U.S. Distributor Continue to Fight, Promise Truck Deliveries

The never-ending saga of the Mahindra pickup truck took yet another turn today as the embattled U.S. distributor proudly proclaimed that it was placing an order for vehicles despite a legal battle over their contract with the manufacturer, Mahindra, who meanwhile defended itself from allegations by the distributor that it tried to back out of the deal.

If you've been following the story for the last four years like we have, you know it's already quite the soap opera. For those that haven't, it's gone pretty much like this: Mumbai, India-based Mahindra signed a deal with Global Vehicles U.S.A. out of Alpharetta, Georgia, to distribute the trucks in the U.S. once certification and testing was completed. The companies originally promised to have trucks on dealer lots in early 2009 and they've been delayed ever since. Things came to a loggerhead in June when Global Vehicles sued Mahindra to force the company to deliver the vehicles.

This is where the story gets interesting, depending on who you believe. According to Global Vehicles, they've plunked down some $35 million to prepare for the launch of the TR20 and TR40 light-duty, diesel-powered pickup trucks in the U.S. The company lined up some 350 dealers in 49 states to sell the trucks who collectively spent $60 million on franchise fees and built dedicated showrooms for the brand. Global Vehicles says that Mahindra continually ran into delays in engineering the trucks to meet strict U.S. crash and emissions regulations and no less than three extensions to the original contract were made to keep the deal alive. Global Vehicles says they tried to have the expiration clause removed from the contract earlier this year but Mahindra refused. The last extension expired on June 11, 2010 and Global Vehicles claims that Mahindra refused to grant another extension. Global Vehicles then sued Mahindra in State and Federal courts to force Mahindra to honor the original contract and bar the company from partnering with a new distributor.

"We trusted Mahindra when they said they wanted to cap their losses if the vehicle couldn't be sold here," said Global Vehicles CEO John Perez in a statement. "We patiently waited and accommodated Mahindra through years of delays and kept an extremely powerful distribution network intact while the factory worked through the complicated task of meeting U.S. emissions standards. We did this because we believed we were all working toward the same goals. Now Mahindra is trying to change the rules. We delivered our end of the contract, and we're ready to get down to business."

Global Vehicles claims that Mahindra intentionally stalled the certification process so that the contract with Global Vehicles would expire. The distributor says that Mahindra added the expiration clause to the original contract negotiations at the last minute to protect itself from losses if the trucks couldn't be certified in the U.S. Global Vehicles claims that Mahindra waited until 10 days after the contract expired (June 21) to file certification papers with the EPA. Global Vehicles then sued to reinstate the contract. Mahindra announced on August 20, 2010 that the trucks had received certification and at the same time announced that their relationship with Global Vehicles had ended. Global Vehicles claims that Mahindra is trying to back out of the contract for reasons unknown, but presumably to craft a more profitable deal with another distributor.

Mahindra, of course, disagrees with Global Vehicles' version of events. The company claims that it worked tirelessly to keep the contract alive through multiple contract extensions and that it had every intention of honoring the original contract. Contrary to what Global Vehicles claims, though, Mahindra claims that Global Vehicles never asked for a fourth contract extension and instead simply let the contract expire on June 11, then sued without warning and started a negative PR campaign against the company. Mahindra says it has every intention of winning the court battle and introducing its trucks to the U.S. market as planned.

Mahindra's statement, however, leaves several questions unanswered. As it's written, the statement implies that Mahindra didn't pursue a contract extension and simply let the deal lapse, suggesting that it was Global Vehicles' fault for not asking for another extension. The company offers no explanation as to why, after giving the relationship its "best efforts" for nearly four years, it would allow the contract to expire so easily. The statement also fails explain the cause of the delays or why the company waited to file its EPA paperwork until just after the contract expired. It also does not explain why Mahindra is fighting Global Vehicle in court to keep the contract void rather than working out an extension. Despite speaking highly of the relationship and the efforts made to preserve it, Mahindra's release gives no indication that the company wishes to resume its relationship with Global Vehicles despite being so close to actually selling its vehicles in the U.S.

Despite the war of words and lawyers, both companies say they're all geared-up to put trucks in the hands of customers soon, even by December. Mahindra says that it "will endeavor not to allow this dispute and the changed business circumstances to affect its plans to introduce its vehicles to the United States." Global Vehicles, meanwhile, says that it placed an order for "$35 million-plus" worth of trucks today with Mahindra in anticipation of a December launch date. Global Vehicles still refers to itself as the "exclusive Mahindra importer" and is confident it will win the legal battle.

Global Vehicles also has some predictions for the little trucks: the distributor hopes to see first-year sales climb as high as 30,000 units, or roughly half of the 2009 sales of the Ford Ranger. Within four years, the company hopes to see sales hit as much as $1.4 billion annually. Should Global Vehicles win the court battle, deliveries would begin in the Southeast near the company's headquarters and spread throughout the country over the following eight months.

"We are proud of the sales and service network we created to support the launch of Mahindra vehicles, and we look forward to bringing American buyers something truly unique in the marketplace - rugged, high-quality, clean diesel pickup trucks that can achieve nearly 30 miles per gallon," said Perez. "Our dealers are all seasoned auto industry professionals who will treat customers with honesty, integrity and respect. We built our business on these bedrock principles, which should be the foundation of every business relationship."

As alluded to at the beginning, the trucks themselves are still caught in the middle of this mess. Until the legal battle is over, we aren't likely to see them on U.S. roads regardless of the distributor. Even if the court case wraps up quickly, it could still be months before the first sale is made and the December deadline seems as unlikely as every other launch date we've heard over the years. Regardless of whose story you believe, neither side is likely to emerge from this mess happy and, as Mahindra notes, is likely to only hurt the dealers and customers. So for now, as we have for years, we wait.

Source: Global Vehicles, Mahindra

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