CMC sues to block loss of Land Rover franchise to rival
Land Rover, Jaguar and Range Rover brands account for 30 per cent of CMC’s annual unit sales. File
Motor dealer CMC Holdings has turned to the courts to stop Jaguar Land Rover from terminating its franchise with the troubled car dealer, citing breach of trust and goodwill by its business partner.
South Africa-based Jaguar Land Rover (JLR) threw CMC Motors into a crisis last Thursday with the announcement that it would transfer the rights to exclusively trade in Land Rover Defender, Jaguar and Range Rover brands to rival RMA Group.
The auto dealer moved to court on Friday seeking to stop JLR from severing links on the grounds that the franchise owner was driven by malice because it had prompted CMC to spend millions of shillings to strengthen their pact over the past three months despite having made a decision to end their partnership.
The brands account for 30 per cent of CMC’s annual unit sales and their loss will hurt the troubled auto firm whose operating profits have been falling since 2008.
“The steps requested by the respondent (JLR) including the calling for detailed presentations from the applicants (CMC) and the various meetings held were clearly inconsistent with and a departure from the impugned notices of August 3, 2012,” CMC’s chief executive Bill Lay said in an affidavit.
“It is not available to the respondent to call to its aid the said notices or purport to act in furtherance thereof.”
According to CMC, JLR notified CMC on August 3 of its intention to terminate the franchise effective February 2. But the South African firm signalled the Nairobi bourse listed motor dealer it was keen to reverse the decision after it asked for fresh business plans, approved the refurbishment of Land Rover showrooms and arranged a number of foreign meetings in the wake of the August intention.
The dealer also reckons the withdrawal of the partnership will result in job cuts, erosion of shareholder value, and poor credit rating by financiers whom it has relied on to run its operations. CMC says that JLR’s acceptance of further engagement with a view to improve the current dealership renders the August 3 notice null and void. The court is Monday morning expected to make a decision on whether to issue an injunction to JLR.
JLR has previously expressed its disappointment with CMC’s handling of its brands in East Africa, blaming the franchise holder of underinvestment in the showrooms and marketing.
Kenya Motor Industry data shows that CMC’s sale of JLR brands fell steadily from a high of 661 units in 2007 to a low of 292 units in 2010 before rising to 404 units last year.
The withdrawal is a double hit after CMC lost the exclusive dealership of MAN trucks with the appointment of a second dealer, RT East Africa, to distribute the commercial vehicles.
CMC Holdings, which is listed at the Nairobi Securities Exchange (NSE), has been out of the trading floor since September last year.
Capital Markets Authority (CMA) stopped trading in the motor-dealer’s shares in the wake of a vicious shareholder war that has to date ended the boardroom careers of some of longest serving corporate Kenya operatives.
