Volvo Mum in Wake of Lawsuit Based on ‘Cost Per Mile’ Program

Volvo Trucks North America no longer wants to talk about its much-advertised “Cost Per Mile” program since it was sued by Great Southern Truck Co., which claimed VTNA’s failure to honor the program’s financial commitments contributed to the Volvo dealer’s bankruptcy.

Spokesmen for VTNA, a subsidiary of Gothenburg, Sweden-based Volvo AB (VOLVY), declined to discuss the $30 million suit or respond to questions about any aspects of the program.

The suit alleges that Volvo failed to compensate the Richland, Miss., dealership for costs incurred under the program. It also alleges Volvo damaged Great Southern’s financial position, eventually resulting in bankruptcy, through slow payments and failure to follow through on commitments of financial assistance.

Cost Per Mile is a marketing concept Volvo introduced nationwide in April in which all maintenance for a fleet is covered by a predetermined, guaranteed cost based on the number of miles the fleet expects to log.

For that rate, Volvo would guarantee that the truck would stay on the road.

The term of the agreement is based on a truck’s “life cycle,” calculated according to the mileage a truck travels each year and its specific uses.

Similar to leasing, but different in that Volvo and the dealer guaranteed that the fleet would never be without the transportation provided by the trucks acquired, CPM was advertised as a program that would maximize efficiency and minimize maintenance costs.

In an interview Dec. 11, Marc Gustafson, VTNA’s chief executive, said response to the program was “good” (12-11, p. 2).

In a random search of Volvo dealers in Georgia, Tennessee, Virginia, Texas and California, Transport Topics could not find any that were in the program. Volvo offered no help in the search.

Calls to Canadian dealerships did turn up participants, such as Rick Mallais, sales manager of Volvo Trucks Barrie, in Innisfil, Ontario. He said the initiative is working well and that Volvo has honored all commitments.

In March, Gustafson said the program had been “fine tuned and tested in Canada and some parts of the Southeastern United States for two years.”

Great Southern was one of the dealerships to offer the promotion during the test period, and its president, David Woods, was quoted in a Volvo press release announcing the nationwide rollout, calling it “unmatched in the industry.”

This use of Woods’ name is pointed out in the Dec. 27 complaint, which says Great Southern had been described as the “poster child for the CPM program.”

Woods represented Volvo in describing the plan to other industry groups and was asked by Volvo to produce a pamphlet extolling the plan.

Now, however, Great Southern’s complaint says that Volvo has shown itself “to be incapable or unwilling to administer this program fairly or effectively.”

Things apparently turned sour early when, according to Great Southern’s complaint before the Circuit Court of Rankin, Miss., Volvo was repeatedly late with payments owed under the CPM program.

Volvo still owes Great Southern $245,954 under a CPM contract — but has placed the dealership on “credit hold” and destroyed its ability to meet its other obligations, the complaint says.

Great Southern also says Volvo representatives urged the dealership to enter into other transactions that failed to work out and reneged on repeated promises to provide financing.

The suit seeks $5 million in compensatory damages and $25 million in punitive damages.