ADP/Chile Sues Ford Over its Efforts to Appropriate ADP's Business
9 June 1999
DETROIT -- Automotora del Pacifico (ADP), the exclusive importer and distributor
of Ford vehicles in Chile, announced today that it has filed a lawsuit for breach
of contract against Ford Motor Company in the United States District Court in
Detroit, Michigan. ADP is joined in the suit by several of its affiliates.
The lawsuit stems from Ford's June 1 termination of ADP as both Ford's
countrywide dealer in Chile, and its exclusive importer and distributor. The
lawsuit charges Ford with breaching contracts establishing ADP as the
country-wide dealer and exclusive distributor of Ford vehicles in order to
claim ADP's multi-million dollar business for itself, without compensation to
plaintiffs. ADP alleges that this unilateral action runs afoul of the federal
Dealer Day in Court Act as well as the Michigan Franchise Investment Law.
The ADP-Ford relationship began in 1991, following negotiations between
Ford and representatives of the Avayu and Yarur families, two families who
have over 50 years of combined experience in the business of importing,
distributing, selling and servicing vehicles in Chile. The suit alleges that
prior to 1991 the perception of the Ford brand in Chile was poor or
non-existent. In 1991 only 667 Ford vehicles were sold, representing a total
Chilean market share for Ford of less than 1% according to trade sources.
Under the contract executed in 1991, ADP had the right to construct and
operate a network of "subdealers" who would sell Ford vehicles on a retail
basis to Chilean customers. Between the execution of the 1991 Contract and
the 1992 re-introduction of the Ford brand by ADP into Chile, ADP's role
broadened to include distributor and importer functions. According to ADP,
once it took the helm, Ford's sales soared. Trade sources report that in 1993
and 1994, Ford vehicle sales reached 4,684 and 4,770, respectively, and have
remained in the range of 6,689 to 8,677 every year since. Ford expressed its
appreciation of ADP's performance, naming ADP the Number One American Ford
Exporter in 1994, first in sales for Light Medium and Heavy Trucks in 1995,
and the 1996 Growth Challenge Winner.
ADP alleges in the Complaint that Ford tried to gain greater control over
ADP in 1994, pressuring for board membership and attempting to purchase a
majority interest in the auto finance corporation established by the
shareholders of ADP. ADP alleges that in 1997, Ford commanded ADP to produce
a comprehensive five-year plan. At considerable expense of time and money,
and based in large part on proprietary consumer data that ADP had developed at
its own cost and initiative over the years, ADP developed a highly
confidential and complete analysis of Ford's position in the Chilean market
and an analysis of the optimum strategies for going forward. The five-year
plan, according to the suit, contemplated substantial investments by ADP
through 2002. This investment plan was in keeping with ADP's understanding,
derived from its agreements with Ford and Ford's repeated representations,
that the Ford-ADP relationship was long-term.
During the economic decline in Chile in 1998, occasioned by the "Asian
Flu," Ford, according to the lawsuit, stood by and watched as ADP spent its
own capital to sustain subdealers and the Ford brand. The suit alleges that
Ford was unsympathetic to market conditions in Chile, insisting that ADP
achieve sales volumes unobtainable in that economic climate and refusing to
lower prices. Ford, however, reiterated its commitment to ADP, assuring ADP
and its subdealers in January, 1999 that ADP was Ford's "main axle" in Chile.
ADP alleges that it was shocked when, four months later in May of 1999,
Ford suddenly presented ADP's board with a plan which appropriated ADP's
business without compensation, by reducing ADP's role in Chile from exclusive
importer, distributor and dealer to a single retail dealership in a portion of
Santiago. The Complaint charges that Ford has taken advantage of the
proprietary information ADP generated and conveyed to Ford in the five year
plan, so that Ford may step into ADP's hard-earned position, unjustly gaining
for itself the fruits of ADP's local Chilean labor and investments.