Shareholder dispute forces the brothers who founded Mexico's first sports car firm to walk away, casting doubt over the future

The future of Mexico's first sports car company, Mastretta, is under threat due to a dispute between the brothers who founded the firm and the investment company that was financially supporting it.

In a statement issued earlier this week, Carlos and Daniel Mastretta said they had removed themselves from the company they founded in the 1980s.

The dispute stems back to last year when the brothers sought additional funding to prepare a version of its Ford-engined MXT for testing for European Community Small Series Type Approval.

In return for the new investment, Carlos and Daniel Mastretta agreed to not only have a reduced equity holding in the business, they ceded control to Latin Ideas Ventures (LIV) which installed its own chief executive.

A statement said: "On 26 May, the brothers Carlos and Daniel Mastretta announced that they could no longer work with the company whilst under the control of their principal investment partner, Latin Ideas Ventures. 

"It is the contention of the Mastrettas that the new management team made poor strategic decisions, failed to achieve any of the agreed goals, and wasted valuable funds that should have been earmarked for development. It is also alleged that despite a contractual agreement being in place, investors have withheld the second instalment of funding.

"Throughout the last 12 months, the Mastrettas maintain that they have repeatedly warned their board of the potential consequences of management policies, including delays to the approvals programme, but with no action being taken on either this, or the implementation of the subscription agreement, they felt that they had no other choice than to remove themselves from the business until their concerns are addressed."

Steve Hindle, brand manager for Mastretta in Europe said: “It’s pretty clear from the tone of the statement that Carlos and Daniel reached the point of no-turning back." 

The Mastretta brothers are planning to appeal to the company's third shareholder – a Mexican government group – to mediate in the dispute.

"If Mastretta Cars is to succeed, then there are going to have to be significant changes to the corporate structure in order that a platform for new investment can be created. Of course, it’s quite possible that Latin Ideas will attempt to continue without them, but a Mastretta without a Mastretta is not Mastretta," said Hindle.

The MXT has been in gestation for some time. Autocar's Colin Goodwin sampled a Volkswagen-engined prototype in 2008, and a significantly revised Ford-powered machine appeared at Autosport International early in 2013.

The latest plan was to launch the car in 2015, and install Ford’s 2.0-litre EcoBoost engine to replace the Ford 2.0-litre Duratec initially used with cars sold in Mexico. 

 

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Comments
3

29 May 2014
I'm assuming the bank wouldn't loan them cash at the same rate as the investment company? The investment company is driven to see a return on it's investment so a management structure would always be formed.

30 May 2014
Unfortunately, Daniel and Carlos Mastretta were required to cede control (and equity) of the business in order to secure the funding to take the business to the full production stage (including developing new moulds for the better, lighter bodies, and for European Small Series Type Approval testing). So there isn't an option of going to the bank; the Mastrettas no longer have corporate governance. And to be frank, even if they did, they shouldn't need to as there is an investment agreement in place requiring the other shareholders to make agreed contributions. The problem is, the management that the vc's imposed didn't see the need for better, lighter bodywork, nor did they see the need to enter the European market, so they cancelled both and withheld the funding (that was also to underpin current production costs). This is why the brothers felt that they had no option other than to remove themselves from the company, although they still remain as shareholders. The good news is that the design and engineering for the light bodies is complete, and we're ready to go straight into approvals testing, so providing everybody will now sit down and agree on a way forward that allows the MXT to be brought to key European markets, then we can still be ready to export by next spring. But as I said in the press release, there are going to have to be significant changes to the relationship between the equity partners and the founding team who are working to make Mastretta a recognised and successful sports car manufacturer. Steve Hindle Brand Manager, Mastretta Cars (Europe)

6 July 2014
Hello Steve, thanks for the insight into what's going on within the company and explaining the problem. Do you have any updates? Its difficult to find information on this company and its current standing. I love small sports cars such as the MXT and Elise, and it saddens me to think this car and company may be disappearing. Any updates would be much appreciated.

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