Mostly for non delivery to the specification of their contract, and also because rifles submitted for testing broke - their receivers cracked, or their headspacing increased too quickly, or their breech bore eroded excessively for the standards. It was the first time any carbine had broken during procurement approval testing and the rifles submitted would not operate under mud conditions, froze within a few rounds in rain conditions, and would not operate under severe dust conditions, although, it was noted, they could be operated manually.
In short, they could not meet their contract and it was teminated so that the rifles needed could be built by another contractor. It was a gradual termination of operations to allow General Motors (Saginaw) to gear up (oh fun, a pun) to do the additional work, and there aparently was a lumpsum payment to I-P to compensate them for their efforts.
It was a long sad story, and they were given every chance to succeed. The recommendations include a complete change of management before any further contracting was considered.
"Pedersen" was Jon Pedersen of the Pedersen device, and the Pedersen rifle that nearly was our infantry rifle in the place awarded the Garand rifle.
(I tried to make this short and because of that I've been a little loose with details but this is the gist of "Why".)
