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MILITARY CAR DISPUTE SOURS

A disagreement between two firms in the vehicle shipping program adds to problems.

International Auto Logistics accused another company of holding the personal vehicles of troops "hostage." The supposed hostage taker, Liberty Global Logistics, shot back that IAL was defaming it.

"Candidly, we are tired of your threats," a top IAL executive told the firm. Liberty indicated it was tired of IAL's "empty promises."

Are the firms bitter rivals? Actually, they're on the same team shipping the personal vehicles of U.S. troops.

A nasty fight over the past several weeks between IAL and Liberty, an IAL subcontractor, threatened to paralyze a military program that ships up to 68,000 cars annually, mostly for military members transferring to or from bases overseas. Liberty said IAL was in breach of contract for, among other things, not paying the firm at least $6.3 million it was owed for transporting cars on IAL's behalf.

The firm notified IAL earlier this month that it would no longer ship cars for the company.

But on Oct. 19, a federal judge in Georgia, where IAL is headquartered, granted IAL's request for a temporary restraining order, barring New York-based Liberty from withdrawing from its contract with IAL, pending a hearing.

The order was withdrawn with the agreement of both companies Wednesday as they reached a confidential accord.

The legal dustup is the latest blemish in a program that since the spring has generated hundreds of complaints by U.S. troops around the world whose cars have been delivered weeks or months late, often with significant damage.

Seeing two business allies openly bickering is bound to erode the confidence of troops still waiting for their vehicles.

"The whole program is just a nightmare," said Sara Blue, a Navy petty officer based in Oklahoma who picked up her 2006 Mitsubishi Galant on Oct. 16 about two months late. "The program's not working. It's not working at all."

The U.S. Transportation Command, headquartered in Illinois, has acknowledged severe problems in IAL's performance under the nearly $1 billion contract. But the military says significant strides have been made to improve IAL's performance.

IAL declined to comment.

"We have noted incremental improvements with on-time deliveries each month IAL has been delivering vehicles," TransCom said in an email Friday. "Everyone at (TransCom) understands the hardships and inconvenience many military members and their families have faced during this contract transition."

The command said it has enhanced oversight of IAL's work.

IAL took over the military contract starting May 1 after it wrested it from American Auto Logistics, a New Jersey firm that had delivered vehicles for over a decade. IAL was the low bidder by $38 million, though TransCom said it did not award the contract on price alone.

The command said it believed IAL was fully capable of handling the work despite its relative inexperience. Delivery problems quickly surfaced as IAL took over.

TransCom officials insist that the IAL contract saves the government $50 million a year. But the command has not revealed how it arrived at that figure when the lower bid saves it no more than $7.6 million annually.

There are savings in the contract that would have benefitted the government no matter who won the work. For example, the government closed several vehicle processing centers, including an Orlando center that was the only one in Florida. That saved up to $9 million annually.

Liberty, IAL's subcontractor, accused IAL of several breaches of contract, saying the company was not being paid in a timely manner and IAL software that tracks cars was deficient.

Liberty said in emails and letters to IAL that it questioned the company's finances and ability to pay its debts. Liberty noted that IAL took out an $8 million line of credit in 2013 that expired in July.

IAL told Liberty its finances were fine, and it said late payments had more to do with deficient invoices submitted by Liberty, which could not be reached for comment.

IAL officials said Liberty notified them earlier this month that they were terminating the contract and would hold vehicles in its possession as security against the money it was owed.

"If this is allowed to take place, it will irreparably harm IAL, thousands of our military members and their families and the national defense of the United States," IAL attorneys said in a court filing.

A judge then agreed to issue the restraining order before the parties, at least temporarily, settled their dispute. They report back to a judge in two weeks on the status of their relationship.

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