Q1). What are the basic issues between Mahindra and Global Vehicles?
A).This is a basic contract dispute. Global Vehicles alleged that Mahindra failed to fulfill its contract obligations. The Arbitration Panel in London ruled clearly and decisively that Global Vehicles claims were unfounded. Mahindra has acted responsibly and fulfilled all provisions of the agreement with Global Vehicles.
Q2). What were Mahindra's expectations for the US market at the time the company contracted with Global Vehicles to represent it in the US?
A). Mahindra entered into an agreement with Global Vehicles because the company was interested in launching a small truck, the Scorpio, in the US market. The contract with Global Vehicles was simply one more step Mahindra was taking in order to be prepared for a successful launch of a vehicle in the US.
Q3). Was Mahindra serious about entering the US market at the time it entered into an agreement with Global Vehicles?
A). Absolutely. The contract with Global Vehicles is proof that the company was serious about entering the US market. Moreover, we spent about $100 million to try and bring the Scorpio to the US. There is no question about the Company's commitment to this initiative.
Q4). Did Mahindra do what it was reasonably capable of doing to bring the Scorpio to the US market in a timely manner?
A). Yes. Absolutely.
Q5). Why wasn't Mahindra successful with the US launch of the Scorpio?
A). Despite the company's very best efforts, it was not possible to achieve the necessary certification at this time. Several factors were involved.
As a global auto company, we fully appreciate the importance of the US market, and we still hope to enter the market at some point.
Q6). Was there any issue regarding a delay in the launch of the truck so Mahindra could void the contract?
This false allegation went to the heart of Global Vehicles’ claims in the London arbitration and the Court ruled definitively against Global Vehicles.
The suggestion that Mahindra promised that vehicles would hit the US market by a date-certain cannot be squared with the facts. Everyone knew that there were developmental risks that affected the timeline, and GV and Mahindra both wanted the option to able to walk away if certification was not achieved by a date certain.
Q7). Explain the relationship Global Vehicles had with the dealers it signed up. And did Mahindra consider buying Global Vehicles?
A). It is apparent that Global Vehicles followed an unusual pattern with respect to the deposits it collected from the dealers that joined its network.
Under Generally Accepted Accounting Principles (GAAP), Global Vehicles should have treated these amounts as deposits and been prepared to refund them to the dealers in the event Mahindra was unable to certify vehicles for sale in the United States prior to the deadline for the agreement to expire.
Instead, Global Vehicles apparently treated these dealer funds as revenue that it used to cover ongoing expenses.
Global Vehicles allegedly collected over $30 million in funds from the dealers but ultimately ran out of cash. At that point, Global Vehicles was continuing to try and sign up dealers and its major shareholders were pressuring Mahindra to buy them out in order to save the venture.
In response to this financial crisis, Mahindra considered acquiring Global Vehicles, but before Mahindra could properly analyse important due diligence information Global Vehicles broke the negotiations and sued Mahindra.
Q8). The agreement between Mahindra and Global Vehicles was extended multiple times. What is the story behind these agreements?
A). The parties’ original agreement, terminated on June 11, 2010, pursuant to an amendment to the agreement that was approved and signed by Global Vehicles on May 25, 2010 after it had an opportunity to discuss the amendment with its counsel. At the request of Global Vehicles the original termination provision was extended three times by Mahindra. Global Vehicles chose not to request a fourth extension when the contract terminated on June 11, 2010, but instead chose to initiate an arbitration and litigation against Mahindra.
The original version of the agreement was signed in Paris after approximately 8 months of negotiations. Both parties were advised by engineering and legal advisors prior to the signing of the agreement.
Q9). Was the ruling by the International Arbitration Court comprehensive?
A). Yes. The Arbitral Tribunal addressed all of the contract claims and all of the non-contract claims that Global Vehicles brought or could have brought against Mahindra. This included the specific claim that Mahindra intentionally delayed the launch, which was unanimously rejected by the Arbitral Tribunal.
Q10). Is Mahindra confident it will prevail in the various lawsuits?
A).We won't speculate on the actions of Courts, but the record thus far is clear.
The Arbitration in London proceeded to a full hearing and resulted in a final award rejecting Global Vehicle's claims and ordering Global Vehicles to pay Mahindra's attorney fees and costs.
In the Missouri litigation, the dealers tried to allege that Mahindra should be found subject to jurisdiction in that state because Global Vehicles made certain representations to dealers on Mahindra’s behalf in Missouri, but the Court soundly rejected that argument, noting that (1) Mahindra had no contractual relationship with any Global Vehicles’ dealers; and (2) That Global Vehicles was not Mahindra’s agent, thus Global Vehicles’ activities in the state of Missouri could not be imputed to Mahindra.
Q11). What is Mahindra's understanding of the Missouri Court ruling?
A). Mahindra has been dismissed from the case and the only defendant remaining in the case is Global Vehicles.Simultaneously, the court found that Mahindra was not subject to jurisdiction in the state of Missouri. In reaching this conclusion, the Court found that (1) Mahindra had no contractual relationship with any of Global Vehicles’ dealers; and (2) that Global Vehicles was not Mahindra’s agent, thus Global Vehicles’ activities in the State of Missouri could not be imputed to Mahindra.
As an aside, we also observe that Global Vehicles has been sued by a number of other dealers in various other jurisdictions around the United States. Mahindra is not a party to those lawsuits because those dealers correctly recognized that Global Vehicles was the party responsible for taking their money.. In one of those cases, Global Vehicles was ordered to pay damages to the dealer.
Q12). Did Mahindra make a mistake in contracting with Global Vehicles in the first place?
A). Mahindra entered into the agreement with Global Vehicles with good faith and the best of intentions. A variety of circumstances made it impossible for the company to proceed with the launch of the planned vehicle at this time. It is unfortunate that Global Vehicles handled their responsibilities as poorly as they did.
Q13). Was Mahindra's US expenses largely covered by the fees Global Vehicles collected from dealers?
A).Absolutely not. As part of the original agreement, Global Vehicles was required to pay Mahindra a nonrefundable fee of $8.5 million. Global Vehicles contributed approximately $1 million in additional funds to the development of the Scorpio. Global Vehicles’ total payments were less than one tenth what Mahindra spent in its efforts to bring the Scorpio to market in the US.
Q14). Does Mahindra know what happened to the $30 million Global Vehicles collected from dealers?
A). No. The fees paid to Mahindra for distribution rights were $8.5 million. And an additional $1 million was contributed to help develop the SUV vehicle. Global Vehicles representatives will have to address questions about how they handled the fees they collected.
Q15). Was Mahindra committed to spending the necessary funds to successfully enter the US market?
A). Yes. Mahindra spent nearly $100 million in its efforts to bring the Scorpio vehicle to the US market.
Q16). Is Mahindra committed to the US market? If so, how soon would the company likely enter the US market?
A).We remain interested in the US market and we hope one day to offer one or more vehicles for sale there. As the events of the last few years confirm, the process of entering the US is very complex, costly and time consuming. We will not speculate on the likely timing of our efforts except to say that we continue to give this issue very serious consideration.
Q17). Dealers still seem interested in selling Mahindra vehicles in the US. Will this happen?
A).At some point we hope to be able to enter the US market. Obviously many factors will determine when and if this will happen. We appreciate the interest of the dealers, but we are not in a position at this time to give further guidance regarding our plans for the US Market.
Q18). Does Mahindra expect to receive fair treatment in US courts?
A). Absolutely. The company has every confidence in the integrity and impartiality of US courts.