WILMINGTON, Del. – Turkish bus maker Temsa and its U.S. distributor, CH Bus Sales, are undergoing a messy divorce.
Temsa recently told CH Bus it was terminating their eight-year-old distribution agreement and also filed a lawsuit against CH Bus requesting “declaratory relief” to protect “products and collateral” that are in the possession of the distributor.
CH Bus was delinquent on $7.7 million in payments for motorcoaches and parts, Temsa alleged in a December 2017 letter, according to documents filed in U.S. District Court for Delaware.
Temsa notified CH Bus on March 20 that it was terminating their distribution agreement “because of CH’s material breaches and failure to cure the same during any applicable period.”
Temsa was planning to open Temsa North America in the U.S. in late June or early July to distribute, sell and maintain its own motorcoaches.
Michael Haggerty, chairman and majority owner of CH Bus Sales, said in an email in June that the company also has sued Temsa, alleging the coach maker owned CH Bus $4 million, and that both parties agreed to mediate the matter. He said the issue would remain unresolved pending mediation.
“We have filed suit against each other and we will remain the distributor until such time that we have resolution,” Haggerty said in the email. He later acknowledged that he was holding off on filing suit pending the outcome of mediation.
However, industry officials familiar with the matter disputed the assertion that CH Bus would remain the Temsa distributor. They insisted that while CH Bus can continue to sell any Temsa parts and vehicles it owns it can no longer do anything under the Temsa name.
On June 6, the parties filed a stipulation that they agreed to seek referral to a federal magistrate judge for a mediation session within 60 days. They agreed to seek a private mediator if the judge is not available.
In the meantime, the parties stipulated that they would undertake settlement discussions over the financial issues.
In its March 20 notice to CH Bus, included in court filings, Temsa declared, “The distribution agreement is hereby terminated effective 90 days from the date hereof,” or on June 20.
That notice stated that CH had breached the distribution agreement by failing to pay for motorcoaches and spare parts on time; selling third-party parts; improperly using demo coaches; failing to provide required financial statements and business plans; failing to promptly notify Temsa of customer complaints or claimed defects; and failing to service customers as required.
In addition, Temsa stated that CH Bus violated the agreement by failing to ensure “its solvency, equity and cash flow” and “Impermissibly providing Temsa with incorrect documents or information, with fraudulent intent.”
Temsa filed suit on April 9 in the Court of Chancery for Delaware. CH Bus filed a notice on May 8 to move the case to the U.S. District Court for Delaware. CH Bus stated that it is a limited liability company organized under the laws of Delaware but its ownership consists of five members who are citizens of other states — Nevada, Minnesota and California. The company also requested a jury if the dispute goes to trial.
Temsa’s December letter cited a CH Bus claim that it was owed money by Temsa as compensation for claimed defects in a shipped motorcoach.
The letter stated that Haggerty “wrote in an email to Temsa representatives wherein he stated that CH would be deducting $250,000 from the sale” of a particular motorcoach “and indicated that CH will process the manufacturer certificate of origin (MCO) if the MCO is not immediately sent by Temsa. CH is not authorized to take either step.”
In addition, the letter stated, “CH believes that certain of Temsa’s products are substandard and that Temsa has not met its obligations with respect to those products, relieving CH of its obligation to pay Temsa.
“The bulk of your letter focuses on claims that Temsa has provided substandard products to CH and has, thereby, damaged CH and become obligated to pay substantial sums. If Temsa’s products are as defective as CH claims, CH would not demand that additional buses be shipped . . . The fact of the matter is that Temsa’s products are not substandard . . . issues raised as to the products are transparent attempts to deflect and justify CH’s failure to meet its obligations and to gain leverage in negotiations with Temsa.”
The letter argued that CH Bus’ product claims were “extra contractual” because Temsa’s responsibilities are covered in the distribution agreement, “which is clear and unambiguous as to the parties’ rights and obligations.”
Temsa entered the U.S. market with CH Bus in 2010 and sold its 1,000th vehicle here early in 2017. CH Bus reported sales of 200 new motorcoaches last year.
Temsa sells three models in the U.S. — TS 30, TS 35E and TS 45 — that range from 30 to 56 seats. At the beginning of June, the CH Bus website listed more than 60 used motorcoaches, limousines and shuttle vans for sale.
For 2017, “We will probably sell 15- to 20-percent more new units than we did in 2016,” Duane Geiger, then-president and CEO of CH Bus, said in an interview last year with Bus & Motorcoach News. He anticipated continued growth that could bring a Temsa factory and electric motorcoach to the U.S. in coming years.
Geiger has since left CH Bus.
CH Bus operated sales and service centers in Orlando, Fla.; Pine Brook, N.J.; Fort Worth, Texas; and Burlingame, Calif., although some of those reportedly have been closed. Authorized services were offered at 16 affiliates across the country, but it is unclear how many are still offering service.
Temsa’s manufacturing plant in Adana, Turkey, is equipped and staffed to produce 4,500 buses and motorcoaches and 6,000 light trucks annually, company press materials state.
Temsa exports 40 percent of its bus and coach production. The company says it does business in 66 countries and “owns distributor and dealership networks in 30 countries.”
The Temsa website reports, “In France alone, more than 5,000 Temsa-brand buses and coaches are on the road. Additionally, Temsa’s other major markets in Europe include Germany, Italy, Austria, Sweden, Lithuania and the Benelux countries. Thanks to its expanding product range, Temsa is also rapidly increasing its market share in the United States.”