Most Sterling Dealers Signed Settlement Deals with Daimler Trucks, ATD Board Member Says

This story appears in the April 20 print edition of Transport Topics.

Most of the 300 Sterling Trucks dealers in the United States and Canada accepted settlement offers from Daimler Trucks North America after DTNA announced it would shut the brand down, the Sterling board member of the American Truck Dealers said April 9.

“At least 80%, and probably more, of Sterling dealers signed the agreement by the Jan. 15 deadline,” Paul Schlagenhauf, an ATD board member and owner of the three-location Badger Truck Center, Milwaukee, told Transport Topics.

But several dealers in early April told TT they remained upset with DTNA’s decision, and at least one has filed a lawsuit against the truck maker.

Those who were upset said they didn’t feel DTNA offered them enough money to compensate for the capital and time they had put into their Sterling dealerships.

Daimler’s offer, sent to dealers shortly after its October shutdown announcement, included a one-time fee for the dealership, which varied from dealer to dealer, plus a bonus for the total number of trucks sold during the dealers’ best year between 2003 and 2008.

The bonus amounted to $1,500 for each Class 8 and $750 for each medium-duty truck, according to former dealer Gary Gibson.

Schlagenhauf said he and most dealers signed by the January deadline after DNTA agreed to tweak its initial agreement. He declined to say what changes were made.

Conan Barker, co-owner of Velocity Vehicle Group, Los Angeles, told TT that his company had signed the agreement with DTNA. He said two of his company’s 12 locations were Sterling dealerships, six sold Freightliners and the others are service and parts centers.

“We thought it was fair, especially given the current economic climate,” Barker said. “I think the Freightliner brand will do better now, because you won’t have the difficulties of trying to define the two brands.”

Five other Sterling dealers de-clined to discuss the Daimler offer, with at least two saying they were still in negotiations.

One dealer, who did not want to be identified, said that Sterling dealers who also had Freightliner franchises were much more likely to accept the offer to avoid litigation with Daimler, while those who had only Sterling, or just Sterling and Western Star, did not have that incentive to settle.

The latter brand had just 1% of the Class 8 market in the first quarter of 2009, according to WardsAuto.com. Sterling had 5.7% market share for the quarter, and Freightliner 29.2%, according to Ward’s.

John Hogan, owner of what had been Crossroads Sterling Truck Sales in Springfield Ill., was one who rejected Daimler’s offer. He recently rebranded his dealership as Crossroads Ford Truck Sales, selling light and medium trucks.

“I’ve invested $3 million in my stand-alone Sterling location andthe total that Daimler offered me was just $25,000 for that dealership, plus the sales bonus,” Hogan told TT. “I did not find the Daimler offer acceptable in any way.”

Hogan has filed a lawsuit in an Illinois state circuit court, naming both DTNA and Chief Executive Officer Chris Patterson. The lawsuit claims damages of $50,000 on each of nine separate counts under the state’s Motor Vehicle Franchise Act. He is seeking triple damages for each violation.

“DTNA does not intend to permanently discontinue the manufacture of Sterling trucks, but intends to transfer Sterling designs, chassis, drive trains and other parts to DTNA’s Freightliner and Western Star brands . . . [which] has deprived Crossroads of an adequate supply of new trucks and has destroyed the entire value and transferability for Crossroads’ franchise, and Crossroads has lost business,” Hogan’s lawsuit said in part.

DTNA spokeswoman Maria McCullough told TT that it was “corporate policy not to comment on any pending legal matters.”

Hogan said that because he did not sign the Daimler settlement offer by the January deadline, engine maker Detroit Diesel Corp., another DTNA subsidiary, canceled its contract with him. His company had provided DDC parts and service to customers.

In a letter to Crossroads, which Hogan provided to TT, Monte Mehring, DTNA’s director of dealer operations, wrote, “DDC will not accept any further orders, will cancel all pending orders, and will not accept any claims for warranty reimbursement for work performed” after April 10.

Mehring’s letter did not give a reason for the cancellation.

Gibson, who ran TriState Sterling and Western Star in Cincinnati, signed the agreement. He since has sold the dealership and relinquished his position as chairman of the American Truck Dealers.

“I was very bitter, very unhappy about the decision to shut down Sterling,” Gibson said. “Sterling constituted 90% of my revenue, so Daimler effectively put me out of business.”

Gibson is now working as a consultant for the Peterbilt dealer that bought his dealership.