Mahindra sued by US dealers for a fraud of more than $60 million

Mahindra, the largest utility vehicle maker in India and the largest truck manufacturer in the world, by volumes, has been constantly delaying launch of their vehicles in US. This has irritated their dealers in US. These very dealers have now filed a lawsuit against Mahindra for these delays, misrepresentation and conspiracy which according to the dealers of the US has caused them loss to the tune of $60 million in both cash and trade secrets.

According to the case filed, M&M had fallen back on their original promise when they informed dealers across the US that their light trucks and SUVs were ready for delivery. But since then the dealers have neither heard from M&M nor have any consignments been dispatched to dealers in the US for sale.

According to statements issued, M&M willfully delayed certain certification processes of their vehicle despite taking dealership fees, trade secrets and laying the foundation to enter the US markets and build a dealer network way back in 2004. A case was filed on June 4, 2012 against Mahindra and Mahindra Limited and Mahindra USA by dealers in New Hampshire, Florida, California, New Jersey and Washington, in the US District Court in Atlanta.

These dealers declare that on behalf of M&M they paid initial dealer fees, undertook marketing activities and even built exclusive Mahindra showrooms and hired personnel to market M&M line of products which has taken over 8 long years with no hope in sight leaving them with no other recourse but to approach the courts.

Auto News Release

U.S. Automobile Dealers Sue Indian Truck Manufacturer For Fraud And Conspiracy

ATLANTA, June 5, 2012 /PRNewswire/ — U.S. automobile dealers from across the country filed a lawsuit yesterday accusing the Indian truck manufacturer Mahindra & Mahindra, Ltd. and its U.S. counterpart of fraud, misrepresentation, and conspiracy. The lawsuit alleges that Mahindra duped hundreds of U.S. auto dealers and walked away with more than $60 million in cash and trade secrets. Then Mahindra simply reneged on its promises, according to attorney Michael Diaz, the managing partner of Miami-based Diaz Reus & Targ, who leads the plaintiffs’ legal team of Gary Davidson, Brant Hadaway, Carlos Gonzalez and Sumeet Chugani.

“Mahindra told the dealers that its light trucks and SUVs were ready for delivery to the U.S. market,” said Diaz. “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 mass tort lawsuit was filed in U.S. District Court in Atlanta (#KH199170-3) on June 4, 2012 against Mahindra & Mahindra, Ltd, and Mahindra USA, Inc. by dealerships in New Hampshire, Florida, California, New Jersey, and Washington. Dealers across the country paid initial dealership fees, undertook marketing on Mahindra’s behalf, built Mahindra showrooms, display platforms and showcases, and hired additional personnel, all at Mahindra’s urging, according to the lawsuit.

“Through their false representations, the defendants lured the U.S. dealers into making investments and promoting Mahindra’s brand name,” said Diaz. “Mahindra is going to learn that trying to outsmart the dealers was a serious mistake, as we will aggressively seek justice for our clients.”

According to the lawsuit, Mahindra began laying the groundwork to enter the U.S. market and build a nationwide dealer network in 2004. In a high-profile move to court the U.S. dealers, Arun Jaura, a senior Mahindra executive, attended an Atlanta automotive show in 2007 where he repeatedly proclaimed, “I love America!”

At that show, which was attended by about 400 U.S. dealers, Mahindra executives presented promotional videos that showcased its vehicles’ durability, purportedly showing them being driven on different terrains. Jaura also provided a set time-line for introducing Mahindra’s four-door truck to the U.S. market at the end of 2008, and Mahindra’s two-door truck and SUV in the third quarter of 2009.

Mahindra’s pitch was highly successful. Ultimately, it obtained $9.5 million in fees from the dealers, according to the lawsuit. Through a barrage of press releases, sales pitches, advertisements, and news articles orchestrated by Mahindra, Jaura’s comments were subsequently used to entice more U.S. dealers to agree to carry Mahindra’s vehicles.

Over the next two years, Mahindra continued to reassure the U.S. dealers that its certification process was on target, while in fact it was delaying submitting its documentation to regulators as a pretext for terminating its agreements, Diaz added.

“Mahindra repeatedly failed to live up to its obligations,” Diaz explained. “Now, after spending millions of dollars on behalf of Mahindra, the U.S. dealers have nothing to show for their time and energy other than a series of false promises.”