MAN Trucks, dealers spar over compensation, service support agreement

Almost a month and a half after German truck maker MAN announced plans of winding down its India operations as part of a global restructuring effort, the impasse over compensation between the company's 42-odd dealers and the management continues. 

While company officials claim a majority of them, around 30, have accepted and signed the so-called service partner support programme, dealers said only four of them had signed on the dotted line. Dealers said that the programme didn't have much merit as it would only ensure their survival and not viability. A MAN spokesperson declined to comment on the story.  

On Wednesday, in a letter to Joerg Mommertz, chairman and managing director of MAN Trucks India, John K Paul, the president of Federation of Automobile Dealer Association (FADA) told him of the dealers' predicament and financial loss they would have to bear because of the company's decision to halt production and sales of the CA range of vehicles with immediate effect.

"We request you to kindly develop a compensation formula which will help them during their settlement with your company. We would also request you to share with us the terms of your support to our member MAN Dealers so that the same can be communicated to them at the earliest," wrote Paul. 

A MAN official who declined to be identified said the company empathised with the dealers' plight and was doing its best to support them. "Almost 30 of them have agreed and signed the service support agreement," he said. Dealers, however, refuted the company's claim. "Only a few have agreed, a majority of us have yet to sign. Moreover, the programme doesn't warranty any compensation, this will just ensure we somehow survive," said one of the dealers claiming that he had invested close to Rs 300 million over the last 12 years and hadn't received any return on investment. "All we are asking for is fair compensation for the investment made so far," he said.

"The support programme being offered by the company is not compensation. It will just ensure we somehow survive," said another dealer.

According to the service support programme sent to the dealers on 6th September, a copy of which has been reviewed by Business Standard, the average margins on spare parts sold by the dealers have been revised to 30 per cent from the earlier 20 per cent. The company has also increased warranty cost and warranty labour rate reimbursement and introduced service support bonus as part of the programme. 

All the schemes are subject to the dealer honouring the full tenure of the service partner contract till the calendar year 2023.

In his letter to Mommertz, Paul pointed out that the dealers would have to manage an entire infrastructure which would need another round of capital expenditure. 
 

"For any vehicle which is not sold in a country anymore, this kind of a new investment is not at all viable as it will definitely start to nosedive from day zero itself," he wrote. The dealers are also looking to take a legal recourse to seek compensation.

In a market where home-grown companies sell nine out of every ten trucks and buses, the going has not been smooth for MAN Trucks India, a fully-owned subsidiary of Germany's MAN Truck & Bus AG, which is a part of the Volkswagen group. It entered the market in 2006 through a joint venture with Force Motors and subsequently bought out the latter's stake in 2013. A high-cost structure and lack of products brought an abrupt end to its India innings in August.

This is the second time in less than two years that dealers are considering a legal recourse amid dissatisfaction over compensation. In June 2017, dealers of General Motors threatened to file a class action suit as they were peeved with the measly sum the company was offering. The issue was eventually settled after it agreed to compensate them adequately. 

"In any exit, there are losses all over. Be it the company, dealers or vendors, everyone stands to lose," said VG Ramkrishnan, founder and managing partner at Avanteum Advisors. Dealers who have land parcels would be better off than the one who are operating from rented places, he added.