Global Vehicles USA Says Mahindra Delayed Truck Certification to Void Contract

Global Vehicles USA Says Mahindra Delayed Truck Certification to Void Contract

India-based automaker Mahindra is taking unfair advantage of an escape clause in its contract with U.S. distributor Global Vehicles USA to terminate its relationship, GV USA CEO John Perez said.

Perez says Mahindra is attempting to claim exclusive ownership of the distribution and sales channel ahead of the arrival of its small diesel pickup in the United States, a development that has been expected for the last 18 months.

Mahindra officials in India did not respond Thursday to requests for comment.

GV USA and Mahindra are fighting in arbitration and in federal court over repeated delays getting Mahindra’s clean-diesel pickup certified for sale in the U.S. At the same time, Mahindra has issued two press releases stating that its relationship with GV USA has “expired.”

Mahindra’s clean-diesel pickups were expected to go on sale in the U.S. by the first quarter of 2009 but their arrival has been pushed back four times; the latest on-sale date is reportedly this December.

The original delays were technical problems with getting the trucks ready to meet U.S. standards, Perez said, but he blamed the last few delays on Mahindra, saying the automaker is trying to bully GV USA into stepping aside and letting Mahindra exclusively run the U.S. pickup truck distribution.

In September 2006, according to Perez, the companies signed a contract that gave Atlanta-based GV USA a 15-year exclusive distribution agreement to sell Mahindra vehicles in the U.S. But the latest delays in bringing the trucks here have opened an opportunity for Mahindra to void the contract, citing a clause in that contract that limited it to three years if the trucks weren’t certified for sale in the U.S. by the end of that three-year period.

Perez said the clause was inserted into the contract during last-minute negotiations in Paris in 2006, because Mahindra was concerned that it could be sued if the pickups weren’t able to meet strict U.S. federal safety and emissions standards for technical reasons. The clause gave Mahindra three years from when the contract was signed to get the trucks up to U.S. standards.

“The purpose of the clause was very clear,” Perez said. “If Mahindra was not able to meet [U.S. standards], we’d both walk away and take our losses, period. We didn’t think this would be something they would try to use against us down the road, which is what they are trying to do now. We [made it] for three years, thinking that would be enough time. We didn’t want to keep investing in it [if they couldn’t].”

What’s unclear is how both companies are interpreting the clause today.

Perez says that as long as the trucks were ready to pass U.S. standards – which he says they were ready to late last year – the spirit of the clause was met and could no longer be used by Mahindra as an out from the contract. But Perez says that Mahindra is interpreting the clause to mean at the moment the trucks were certified for sale by the U.S. government; the last hurdle was passed on Aug. 20 when the clean diesel was granted EPA emissions certification.

Before a vehicle can be imported, it must have a label that certifies it meets U.S. safety standards and the EPA must verify that it meets air-quality standards. The federal agencies verify the information but don’t perform the testing.

According to Perez, Mahindra and GV USA agreed to two extensions to the clause beyond its original date of August 31, 2009 because of delays. The last extension was through June 11 – the same day that GV USA filed suit in US federal court to prevent Mahindra from distributing vehicles directly in the U.S. or with a new partner.

“In October 2009, Dr. [Pawan] Goenka [president of Mahindra’s automotive business], told us that it was all green and there was nothing that would prevent us from getting certification,” Perez said. “All we had to do was finalize the 100,000-mile road test [for EPA certification]. As far as we were concerned, at that point, the clause was no longer an issue any more. We knew Mahindra could achieve the certification.”

Mahindra hired third-party suppliers, including Bosch, AVL and MB Tech, a subsidiary of Mercedes-Benz, to help its pickups meet U.S. Standards. According to Perez, positive information from those companies was the basis for the expectation that the trucks would meet safety and emissions standards.

“They did all the testing and then they would provide the U.S. government with the results that they passed,” Perez said. “All of the tests were passed.”

In March, Perez says that Mahindra began to pressure GV USA to sell certain assets and indicated that Mahindra wanted to pick select dealers. The terms weren’t favorable to GV USA, which says it has signed up more than 350 dealers and spent almost $35 million preparing for the launch.

“I said we wouldn’t do that,” Perez said. “If [Mahindra] wanted to buy the [entire company], we’d sell it at a reasonable value” but not parts of it.

When Perez didn’t agree, Perez says that Mahindra stopped communicating with GV USA about the final certification for the trucks, in what Perez said was an effort to put pressure on GV USA.

“We knew then they would try to use the June 11 date to try to do what they’re doing now,” Perez said. “That day, Mahindra’s M&A team from India said that if we didn’t agree to the terms they were offering, they would cancel the contract. They threatened us. We filed [the lawsuit] right after that.”

In early May, Goenka told Automotive News that Mahindra had successfully finished its testing and would submit its final paperwork to the EPA with the expectation that it would be certified by the end of June.

“I look back now. If we ever made a mistake, it was at 11 at night in Paris,” Perez said. “They came sneaking into the hotel and they knew we didn’t have lawyers to represent us.” The contract had been negotiated in the U.S. before Paris. “We wrote the clause in principle in the contract. I look back: Was it their intent to use the clause? I don’t know.”

Now, the case is in the hands of a federal judge to decide.

Comments

shady company.... trust?

What is unbelievable is people are actually fighting in court for the rights to sell this 3rd world shitbox.

Excellent article and interview, Mike. I am glad that Mr. Perez has finally come out and explained GV’s side of things. I would hope that Mahindra would have the balls to explain their side of things, but… well maybe they will issue a press release telling everyone in the US to pound salt. Arbitration begins on September 15th. We’ll see what happens.

The truth finally comes out. Run away far and fast from Mahindra! This says volumes about the low levels they will go to make a quick buck.

Only a dumb or desperate potential dealer would ink a new contract with Mahindra. Hope Mahindra loses lots of money over this SNAFU.

Until this truck builds a solid reputation and parts when needed don't cost both an arm and a leg will sales even be meaningful. Not anytime soon. By which time I'm sure the big three with have their own new versions.

M&M will probably treat thier customers in the same way for warranty work! Anybody that takes a chance with a company like that, would have better luck in vegas. Good luck to all those who buy the pos because your going to need it!!!

Okay I have said this many times now and I will say it yet again... What American in their right mind was going to buy this monstrosity of a truck? I mean I know a few rejects would buy it but seriously no one is going to take this truck serious at all. Most people would run and hide just from looks alone. Its almost as bad as Mahindra tractors. Sure they sell a few to people in the suburbs and occasionally to a farmer but no self respecting farmer would ever buy one. John Deere and International still rule the compact tractor market just as much as Ford and GM will rule the truck market, even if they pull out of compacts. As far as foreign counterparts there are only two who cut it. Kubota (tractors) and Toyota, but these are companies who came in the late 70's and look how long it took them to make an impact. I don't know I think this truck and ideal was DOA before it ever got here...

To those in the minority who say that this truck is ugly, or not needed, here is my take:

A small reliable truck is needed! The Ranger and S10 variants are outdated, too expensive for what they offer, and have no diesel option.

Why have we been left to terribly designed petrol engines when the rest of the world gets at least an option for diesel? How many people buy a 1/2 ton truck when a 1/4 ton truck will do the job? I am talking about farmers, yard-workers, light-duty contractors, the average joe who needs a small truck. I bought a Jeep Cherokee myself in order to fit the occasional towing/hauling role. I think a small pickup would have been better.

Fascinating...I think Perez screwed up his contract, and I think Mahindra overestimates their chances of winning a court battle. My guess is that they'll settle out of court and that Mahindra will become the sole US distributor.

I also think that x007 makes on hell of a point: what is this company going to do with warranty claims? Sounds a little scary.

Zach, those selling trucks to the US market know all too well that the Walter Mittys of Suburbia have to look big and mean in V8 muscle-trucks that do little or no real work.

These urban cowboys are their cash-cows for oversized toys, and working trucks have a far smaller profit margin.

The next oil crisis--and it will come--will change some minds and we'll get Hi Luxes and European Rangers here for the American market. I'll be in line to buy one.

I was once really juiced about the Indian truck, but given all this bullcrap, I'll just wait for a Japanese or US company to bring back mid-sized or compact diesel trucks to these shores.

Pup: "What is unbelievable is people are actually fighting in court for the rights to sell this 3rd world shitbox."

If it'll survive the conditions of the 3rd world, it will put up with what I have to throw with it. Maybe it won't be as comfortable as the 2004 F-150 that I co-own with a family member, but I'd rather commute in my Prius anyway. For my purposes, the Mahindra truck would be perfect -- a 30-mpg roadable tractor that can run on (bio)diesel and tow 5000lbs.

The F-150 is an impressive truck and it's a great all-around vehicle. It's very refined, very capable, and very comfortable -- even for my 4'11" mom, and clearly for 6'5" 300-pounders. But it's not the right tool for every job -- it's a little big for my needs, a little bit expensive, and it uses too much gas for my taste. And there's no diesel version.

Supercrew02: "Not anytime soon. By which time I'm sure the big three with have their own new versions."

I'd love it if they would. A diesel-powered Colorado. Too bad it doesn't exist.

The Prius is my AtoB vehicle, but the Prius can't do everything. A smaller pickup can do the rest of what I need nicely. The Ranger in my driveway does what I need, I like the F-150 that I co-own, but what I really want is a nice little diesel that's in between the Ranger and the F-150 in size and capability. But I guess Ford and GM are worried that such a vehicle might eat into the sales of their bigger vehicles -- but if they start loosing F-150 sales to Mahindra, then maybe they'll step up to the plate. Until then, I can keep bolting parts back onto my Ranger, drooling over the Mahindra, and researching how I would mod an F-150 engine for fuel efficiency...

I would not trust Mahindra as it looks like they found a loophole to kill their contract. They must feel that these things will sell well, and they will make more money with their own network.
I think that there is a market for small trucks. The domestics may be letting compacts die in favor of very profitable full size trucks.
The current rebates offered by the full size truck makers must also factor into the demise of compacts. I saved 25% off of MSRP even before trade in. The discounts put me in the price range of compact/mid size trucks.
If I lived in a big metropolitan center I would not want a full size truck. I rarely saw any full size trucks that were not work rigs when I was on vacation a short while ago.


Business is business. Perez made a poor business decision, and is reaping the consequences; but this wouldn't be the first time he's done that.

x007 and TundraHQ, I, too, hope this is not a reflection on how they plan to treat their future customers. I'm gonna sit by the side lines for a while (what's another year or two at this point) and gauge the response of the "early adopters" before I make any purchases.

But if they can deliver a good product with equally good customer satisfaction, like Zach, I could sure use one of these.

Shady/scanless.......yuk..

Never seen so many people fighting to date the ugly girl before .

I guess that Jetta Sportwagen is going to be my go to diesel vehicle. I'm not prepared to roll the dice on an unproven Indian company's product after reading this article. You can't run a business on Mid-east shenanigans here in the USA. People know better and will call it out.

I want a small diesel pick-up too, but not like this.

Big three are a sleep at the switch. Seven year product cycles don't work anymore.

The Feds need to sign on to global emissions standards.

"The Feds need to sign on to global emissions standards."

Absolutely. But having a car market that's open to foreign competition wouldn't be protectionist enough. There's enough guys on here who will try to rip your throat out for buying a Toyota that was made in the USA -- what would they do to the politicians who removed a significant barrier to high-quality foreign competition?

When I visited the UK, there were dozens of cars that I would have preferred to own over what's available in the US. Small efficient little diesel cars. Many of them were even made by Ford and GM. But they're not sold in the US, so I have to buy bigger more expensive and less efficient machines that are available here. The Jetta TDI was as close as I could come to the car that fit my needs, and it was made in Mexico. For the record, a World Focus with a diesel engine (I saw dozens of them in the UK) would have fit my needs just as well, but I had no choice but to buy foreign. Peugeot and Citroen also had some very nice offerings, so I guess we couldn't risk them taking sales from the Explorer...

@ usa - Shady doesn't even begin to describe them. Looks to me like Mahindra wanted GV to do all the work, then try to buy GV for peanuts, and pick and choose which dealers they wanted. It would have been funny if GV had let Mahindra buy them because I would be willing to bet that all the dealers that Mahindra didn't "pick" would sue Mahindra. Once you're a dealer in the US it’s very hard for a manufacture or distributor to remove you. I do have to give GV kudos on standing up to this massive company and trying to protect ALL their dealers that have waited so patiently for Mahindra to do what they promised they would do despite the many delays. It's so sad that Mahindra is so greedy that they want to have their cake and ice cream at the expense of US dealers and GV. If I was a dealer, I can assure you I would rather have GV dealing with Mahindra rather than trying to work with them directly. With that, I’d like to extend a warm welcome to doing business in the USA, Mahindra! You have much to learn.

GV's been running on fumes for a while now.
Tough on them that they're not smart enough to wait on their attorney before signing a contract.
Now Mahindra, bring those trucks over. I'll buy one. If nothing else, to make Shawn sneer at me.

Those poor GV investors must feel had by Perez. They invested tens of millions. They had to be suspicious by his dubious accomplishments.

Mahindra's new motto: Mahindra, we only know ugly business.

GM could end this whole saga quickly by announcing a diesel-powered Colorado. Just buy a truckload of CARB-approved Touareg TDI engines from Volkswagen. Bolt in, integrate the electronics, and sell me one.

@Don Sneer ain't the word bud... lol

Hey if you all want the truck then go for it. I know there is a need for a truck like it don't get me wrong but not from a shady company like them. Just give it a few years GM and Ford will come to their senses. The Ranger plant is shutting down but Ford has yet to actually kill it keep in mind...

Mahindra would be better off without Global Vehicles. They have done a good job making and selling small tractors and they have a solid presence in the United States.
They made a stupid mistake by entering into an agreement with that shady company called Global Vehicles in the first instance.

All parties will be better off after Mahindra shuts down this failed US pickup export attempt.

@ Shawn

"I know there is a need for a truck like it don't get me wrong but not from a shady company like them."

Mahindra's been in the rest of the world for quite a while now and I'm one of those guys who could care less about refined amenities.
If their pricing hold true and reasonable (cheaper than a competitive gas Toyota or Nissan), I'm in.
As you well know, both Ford and Chevy have turned the backs on the small truck market, and I'm not interested in the least in one of these freaking monsters they call half tons they produce.
Whatever did happen to half ton sized pickups?

Plus, it's only twenty five grand or so for a CrewCab 4X4. (to be seen)
Everybody I know has pissed that much money away in a strip club at one time or another in their life.

WAKE UP PEOPLE!! THIS MAHINDRA IS SCARY!!!!!

PSA: "WAKE UP PEOPLE!! THIS MAHINDRA IS SCARY!!!!!"

Which way do you mean that? Scary for sales of Rangers, Colorados, and F-150s?

Great article, Mike! I'm glad this is all coming out in the open and I hope that GV kicks Mahindra's butt in court. Maybe, just maybe we will see a Mahindra pickup here one day.

Economic Patriotism – makes no sense here because the US exports more to India than it imports from them. US should support India and build it up as a great friend and ally both economically and strategically.
Should Indians say don't buy FORD or GM Or CHEVY cars ?
Should Indians say eat only Indian made food, Dont eat McDonalds, Subway or Burger king or KFC food?
Should Indians say don't use Jonhson& Johnson, Procter & Gamble products in India ?
Should Indians say don't buy Boeing or Lockeed Martin or Caterpiller or John Deer manufactured in the US ?
Should Indians say don't buy Medtronics or US made medical devices?
Should Indians say dont buy Microsoft or Dell or Apple or HP or INTEL or sun or CISCO technology ?
Should Indians say don't buy Honeywell or GE made goods ?
Should Indians say don't buy NIKE or Addidas or Reebok or PUMA or Levis?
Should India impose heavy tax on R&D US companies facilities in India …. because they are using Indian brains and intelligence and selling it all across the globe … and paying fraction of the salaries compared to those work in the US ???

In this economic recession, United States depends more on Indian consumption of American made stuff and United States needs a dependable friend in Asia. Supporting Mahindra is a good start.

For all the post-ers who are waxing moralistic about Mahindra's "shenanigans," grow up and realize you are getting a bird's eye view of the sausage factory we call capitalism. Buddy of mine worked for a long time for a big Midwestern Harley/Kawasaki dealer. His boss was always in some sort of lawyered up fight with those companies over crap they tried to pull on his dealership. The owner was philosophical. He got into the business of owning a business because he liked the fight and the challenge. You don't think GM and Ford try to screw their distributors, parts suppliers, and dealers on a continual basis to squeeze out a buck? Grow the hell up and remember you live in an, arguably, capitalist nation.

The USA is not a capitalistic nation.
Comrades - welcome to the Socialist USA.
Bush - thank you for letting greed and corruption rule the land.
Big government has replaced big business as our saviours.
Heaven help us.

I learned yesterday from a Mahindra dealer close to my house that the distributor Global Vehicles is collecting $5,000 from each dealer to file a class action law suit in Texas against Mahindra & Mahindra tractors for corruption & racketeering. The dealer told me they already have 150 dealers ready and will file the billion dollar law suit as soon as they get 200 dealers, sometime this month. I also wrote Mahindra to ask about it, but no response. I guess we will never see the TR4 in the US and maybe the tractor days are over too. I'm buying a Ford!

This saga is getting more complicated by the day. To the point where it no longer makes sense to comment – especially if all the information is coming from GV! I’d definitely like for Mahindra to come out and say its side of the story. Until that happens I’m focusing on the good news – Mahindra has received EPA’s blessing to sell its trucks here.



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