Dina Files Vs. Western Star With ICC

MEXICO CITY-- Consorcio G. Grupo Dina, S.A. de C.V., a Latin American producer of trucks, has filed charges against Western Star Trucks Holding Inc. with the International Arbitration Court of the International Chamber of Commerce (ICC).

Dina wants $110 million because of the “unilateral cancellation of a multi-year contract” to supply vehicles to Western Star. Both companies had signed the contract in September 1999.

Dina will charge breach of contract because the purchase orders were initially suspended and later cancelled, according to the company. “The $110 million lawsuit also embodies claims for the premature and unilateral cancellation of the contract, outstanding payments due for vehicles sold to Western Star, payment for damages resulting from the breach of contract, loss of interest on corporate capital, as well as arbitration and legal costs associated with the necessary legal action,” said Mauricio G. Mendoza Silva, Dina’s legal director.

When the ICC has decided which parts of the overall claim fall within its jurisdiction, arbitrators will be appointed. Both companies will have 30 days to agree upon the designation of a third arbitrator, who should be of a different nationality and must be approved by the ICC.

Neither company has agreed on the third arbitrator, although each may submit recommendations to the ICC. Dina is considering appointing as its arbitrator Emilio Gonzalez de Castilla, a prominent Mexican lawyer with extensive experience in this area.

Under the terms of the contract, the arbitration proceedings will take place in Charleston, N.C. If necessary, however, the arbitrators may meet at other locations.

The final decision is not subject to appeal, and the timing of the settlement will be binding on both companies.

Gamaliel Garcia, Dina’s chief executive officer, explained that his company had hoped that Western Star (recently acquired by Freightliner) would adhere to the terms of the contract and rectify the situation. “We had thought from the beginning that we were entitled to equitable compensation for this situation. Unfortunately, as a result of the contract cancellation we have experienced significant adverse consequences and have had to assume that there will be fundamental changes in the outlook for this year. We are confident that we shall win this lawsuit.”

Garcia said that once the exclusive rights with Western Star have expired (in 60 days following cancellation of the contract), Dina will seek new opportunities to continue exporting its vehicles to the United States. “It is our goal to market our proprietary technology. We have the quality and capabilities to achieve this, and once attained, we will place our new vehicles on the market.”

Since Western Star modified its contract, Dina began cutting operational costs “in an effort to minimize the financial damage resulting from the breaching of the contract.” As of June of this year, Dina’s strategy has been to focus on minimizing operational costs by curtailing plant production and cutting back on white-collar workers.

“In the near future Dina will be a smaller scale operation, though healthier in the sense that it will more actively participate within its key strategic markets with a complete line of products based upon its own technology. If we obtain the necessary financial resources to finance our customers' purchases of our vehicles we would expect our sales volume to increase,” said Garcia.

On the other hand, said Garcia, “because of the cyclical downturn in the U.S. and Canadian truck market, Dina has been unable to negotiate either the sale of its vehicle business or key assets to a third party. In fact, the majority of the existing producers are focusing on downsizing their own operations before acquiring additional assets. While the company does not dismiss the possibility of eventually consummating such a transaction, there is nothing yet to report in this regard.”

Garcia said that since June 16, 1999, when Dina sold a majority interest in Motor Coach Industries (MCII) to Joseph Littlejohn & Levy Inc. (JLL), the operations of Dina and MCII have been conducted independently. “Very recently, and reflecting the enlarged and controlling majority investment in MCII, the Dina Autobus operations has been renamed MCI Mexico. However, and depending upon marketing and branding considerations in each market served, the Dina badge and brand will still be used. However, no further conclusions should be drawn from the renaming of the business and the branding strategy,” Garcia said.