This would-be Mahindra dealer in Mt. Clemens, Michigan eventually found another franchise.
While few motorists seem concerned that India’s Mahindra & Mahindra’s U.S. launch is four years behind schedule – and counting – the delay has enraged plenty of potential dealers who reportedly ponied up millions of dollars in advance fees to reserve the franchise.
A Miami-based law firm has now stepped in and has filed suit against the Indian maker in federal court alleging fraud and misrepresentation. The lawyers at Diaz Reus & Targ claim Mahindra walked away with an estimated $9.5 million cash and additional trade secrets.
“Mahindra told the dealers that its light trucks and SUVs were ready for delivery to the U.S. market,” said attorney Michael Diaz in a press release detailing the lawsuit filed in U.S. District Court in Atlanta on behalf of would-be dealers in five states including Florida. “However, Mahindra intentionally delayed certification of its vehicles after obtaining the dealership fees and trade secrets, and began pursuing other partners in the U.S. and elsewhere in clear violation of their commitments.”
The original target laid out for dealers called for the launch of the first Mahindra product, a compact pickup truck, in 2008. An SUV was to be added a year later. But before the promised launch, the Indian truckmaker indicated there were problems with certification. And, after repeated delays, it abruptly called off the launch and broke ties to the American distributors who were going to represent the company in the U.S. market.
Using a third party distributor has been a common practice for start-up automakers trying to crack the American market. It was a strategy used by both Subaru and Toyota, for example, and an independent distributor still represents one of the largest sales regions in the U.S. for Toyota.
At the time, some observers believed Mahindra & Mahindra might have simply decided to go it alone, however. But the promised launch continued to be delayed.
Then, late last year, reports surfaced that Mahindra might start building some of its vehicles in Alabama with the assistance of Navistar. The Indian maker dismissed that report.
Where plans now stand for a U.S. launch is unclear. The automotive operations of Mahindra & Mahindra, a $12.5 billion conglomerate, has been anything but forthcoming with details.
However, a statement on the firm’s website states it “unequivocally denies all allegations of fraud, misrepresentation and conspiracy.”
Mahindra began recruiting dealers in 2004, the lawsuit quoting Arun Jaura, a senior executive with the truckmaker, repeatedly declaring “I love America,” during a meeting at the 2007 Atlanta motor show.
The lawsuit claims that wannabe Mahindra dealers in the five states lost $9.5 million in up-front fees and another $100 million in retail “trade secrets” they provided Mahindra during the run-up to the aborted launch.
This isn’t the first time Mahindra & Mahindra has faced a lawsuit over its delayed U.S. launch, notes Autoblog. Global Vehicles USA, the firm that had hoped to serve as the maker’s distributor, lost an arbitration hearing in the UK over a technicality last year.