The row between motor dealer CMC Holdings and Jaguar Land Rover (JLR) has taken a new twist after the South Africa-based firm refused to supply the Kenyan unit with spare parts.
The Nairobi bourse-listed auto dealer has gone to court accusing its business partner of disobeying orders, which
has made it difficult for CMC to repair Land Rover Defender, Jaguar, and Range Rover brands.
Ã¢â‚¬Å“We made a complaint to the court since we have not been getting support from them,Ã¢â‚¬Â said Mary Ngige, who was appointed acting chief executive of CMC following the exit of Bill Lay last month.
Ã¢â‚¬Å“They have started co-operating from this week,Ã¢â‚¬Â added Ms Ngige without giving details on whether JLR has committed to maintaining the flow of spare parts.
Sources at the firm said that CMCÃ¢â‚¬â„¢s after sale services for JLR brands have been grounded.
South Africa-based JLR threw CMC Motors into a crisis on November 26 last year with the announcement of plans to transfer the Land Rover Defender, Jaguar, and Range Rover brands to rival RMA Group from February 3 this year.
CMC moved to court on December 7 seeking to stop the firm from severing links with it, but JLR told the High Court that it had issued CMC a six-month notice of termination and opened a window for the auto dealer to participate in a competitive tendering process where RMA beat it and several other dealers.
CMC said the termination was driven by malice because JLR had prompted it to spend millions of shillings to strengthen their pact over the past three months despite the decision to end their partnership.
JLR is seeking to overturn the injunction issued on December 10 stopping it from terminating its dealership agreement with CMC. The matter is yet to be decided.
The South Africans counter that the notice remained effective during JLRÃ¢â‚¬â„¢s further engagement with CMC and that the franchise owners made it clear that they were reviewing their dealership in Kenya.
JLR identified key problems with CMC as poor credit rating, non-payment of sums owed to the franchise owners, and lack of acceptable showrooms and service centres.
Ms Ngige said that the injunction maintained the status quo and JLR was under obligation to feed CMC with cars and spare parts. The spat comes at a time when dealers have strengthened their spare parts and repair services division to grow sales. After sale services make up between 10 and 20 per cent of dealersÃ¢â‚¬â„¢ revenues.
In recent years, increased activities among the dealers have seen them grow their share of the repair business to about 30 per cent of sales.
JLR brands account for 30 per cent of CMCÃ¢â‚¬â„¢s annual unit sales and their loss poses a big threat to the survival of the troubled auto firm whose operating profits have been falling since 2008.
CMC has been in the eye of a storm since late 2011 when Peter Muthoka, its leading shareholder, was ousted as chairman in a boardroom coup culminating in a series of legal suits and the suspension of CMC shares from trading at the Nairobi bourse.