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M&M terminates contract with US distributor for pick-ups

Tuesday, 31 August 2010

31 August 2010;business-standard.com:Swaraj Baggonkar:Mumbai: Utility vehicle maker Mahindra & Mahindra (M&M) has severed its contract with US marketing and distribution partner Global Vehicles Inc. The news comes just three days after M&M received certification from the US Environmental Protection Agency (EPA) allowing it to sell pick-up trucks in that country. Global Vehicles had filed a lawsuit against M&M in June in a US district court in Atlanta for delaying the launch of its trucks, while also accusing M&M of holding back information about the launch and keeping it in the dark. M&M said in a statement that, “Mahindra’s relationship with Global Vehicles Inc has ended, the agreement dated September 26, 2006, between Mahindra and GV having terminated.” Global Vehicles, which has so far signed up more than 350 dealers and spent more than $35 million (Rs162 crore) preparing for the launch, stated that any attempt by M&M to terminate their contract would be invalid under US law. M&M’s president for automotive and farm equipment, Pawan Goenka, remained out of reach when contacted for this story. However, a company spokesperson said, “As the matter is sub-judice, we cannot comment.” An out-of-court settlement between the two companies was seen as a viable option, since many of Global Vehicle’s outlets were ready to start selling M&M’s vehicles and that setting up an alternative dealership chain would take several months. Further, Global Vehicle had also asked the court to restrain M&M from engaging with any other dealer or distributor to retail its range of vehicles. In May, M&M reiterated its plans of launching the TR20 and TR40 pick-ups (based on the Scorpio platform) in the US market by December, with production scheduled to start next month at the Chakan, Pune, facility. M&M had first planned to launch a range of vehicles in the US in December 2008. However, due to repeated delays in procuring the required clearanhces from safety and emission authorities, the launch was postponed at least twice. In its suit, Global Vehicles also stated that dealers had spent more than $60 million (Rs278 crore) towards franchisee fees for the right to sell M&M vehicles. At the time the lawsuit was filed, a Mahindra spokesperson said, “Mahindra firmly believes these legal actions to be without merit and will vigorously contest these actions.” Less than two weeks ago, M&M had declared that it had become the first Indian automobile manufacturer to receive a Light Duty Diesel Federal Tier-2 BIN-5 and OBD-II compliance certification from the EPA. M&M planned to launching the pick-up line first, followed by a sports utility version of the Scorpio by December next year. Its new SUV, currently undergoing tests, will also be launch in the US in 2012.