My $0.02
So you had an agreement that:
As part of the purchase of second machine, the repair of first machine was to be included free-of-charge for labor.
The machine-in-need-of-repair was in revenue operation at the time.
The attempted repair took it out-of-operation, so you now have accumulated lost revenue at some level.
Regardless of what may be worthy as a 'battle', NONE of the outcomes will reverse what you currently hold as 'lost revenue'.
This means that you have several battles: The first is resolving the contract dispute, the second is reestablishment of revenue operation, and the third, is recovery from lost revenue.
Which battle is most important? Is it resolution of a contract circumstance, or recovering lost revenue, or getting back into revenue operation?
IMO, from a biz perspective, getting back into money-making operation is first-and-foremost... no matter HOW you do it, having money coming in the door is paramount. Get the machine working, and worry about the rest later.
Recovering 'lost' revenue... the only way to do that, is to find some alternative production method or path (and the associated costs) to make deliveries (failure to ship loses customers FAST)
Settling the contract dispute: You could sue, or you could negotiate. I recommend the latter, as the former never results in a strong business relationship. If you proceed with recovery of revenue op, and recover your lost revenue, take those numbers to the dealer's representative so they can SEE the magnitude to which they've exposed you, and discuss resolution options.
The best move, is to make the quickest operational recovery, then negotiate the fiscal relationship in such a way that the business relationship with this dealer is stronger, not weaker, nor abandoned. Any other way, is burning a bridge.