Plan to Bar Chrysler From Shipping New Cars Rejected
State motor vehicle officials, fearing damage to dealers and public inconvenience, Friday rejected a judge’s proposal to bar Chrysler Corp. from delivering new cars to California dealers for 60 days as punishment for illegally reselling defective vehicles.
Instead, the Department of Motor Vehicles, under acting Director Anne Bersinger, sent the ruling back to Administrative Law Judge Keith Levy, suggesting a shorter suspension and calling for further review and hearings, a process that could take months.
At issue is Levy’s May 1 recommendation that Chrysler be blocked from shipping new vehicles into California for 60 days as a penalty for illegally reselling 116 cars and trucks that had been bought back from their owners because of defects under the state’s lemon law.
Chrysler has steadfastly denied any wrongdoing during the course of the 3-year-old case. “We believe that the vehicles in question, sold five years ago, are in full compliance with California law,” Chrysler assistant general counsel Lewis Goldfarb said Friday.
As for the proposed 60-day suspension, Goldfarb said, “It’s grossly disproportionate and has no relation to the so-called harm involved.”
DMV spokesman William Gengler said the DMV bounced the ruling back to Levy because it feared that the lengthy suspension might hurt dealers and consumers, who are otherwise innocent in this case. In hearings on the case more than a year ago, the DMV suggested a 10-day suspension.
“We are asking the judge to amend the length of the proposed suspension while considering the potential impact . . . on the public and dealers,” Gengler said.
He said the DMV continues to favor other sanctions against Chrysler, including establishing strict reporting requirements, prohibiting the company from reselling vehicles repurchased from dissatisfied consumers, and other remedies.
“We are very strong on the fact that a sanction is warranted by the extent of the violations committed by Chrysler,” Gengler said.
The case was triggered by defective Chrysler, Plymouth, Eagle and Jeep cars and trucks, model years 1988 through 1992, that were bought back by Chrysler from their original owners but which found their way back to dealers through an auction house in Northern California in 1992. They were then sold to consumers. The DMV began investigating in 1993.
The case brings to light a practice that consumer advocates argue is widespread in the industry: the surreptitious resale of defective vehicles repurchased by auto makers under state “lemon laws.” By some estimates, 50,000 such vehicles are repurchased from consumers every year.
“I commend the DMV for bringing this case,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, the Sacramento-based consumer group that first brought the case to the DMV’s attention. “It shows how seriously this state is taking this issue . . . and the sleazy practices that endanger people.”
Kelley Weidemann, 34, of Clovis started having brake trouble with her 1990 Chrysler New Yorker almost immediately after she paid $19,000 for it in 1993.
Weidemann replaced the entire set of brakes every three to four months, but the problems persisted, she said. There were problems with the electrical system and the transmission as well.
She thought she had a lemon. What she didn’t know was that her lemon had been recycled after being bought back by Chrysler from its original owner because of defective brakes.
The original owner, Margaret Weeks of Grass Valley, took the car in for nine brake jobs, two sets of front struts, two sets of tires and several front-end repairs, to no avail, according to testimony during the hearings.
Chrysler eventually bought the car back in 1992. The vehicle was then auctioned to another dealer and was resold to Weidemann--with no disclosure of its history.
“I was appalled,” said Weidemann, a mother of four. “How can they play God with other people’s lives?” She is suing Chrysler.
Chrysler says the vehicle did not fall under the provisions of the state’s lemon law because Weeks used the car in her business as a real estate agent.
Rather, Chrysler says it bought the car back from Weeks simply as a courtesy, and had no obligation to disclose the car’s history to Weidemann. Goldfarb, Chrysler’s assistant general counsel, added that the vehicle was repaired before it was auctioned.
Chrysler is not the first major auto maker to run afoul of the laws against “lemon laundering.” In 1993, General Motors Corp. settled a DMV case by paying a $365,000 fine for illegally reselling 71 defective vehicles.
Chrysler typically sends nearly 14,000 new vehicles to its California dealers each month. The proposed suspension would presumably wreak havoc with dealer inventories and result in lost sales.
Rick Evans, owner of Huntington Beach Jeep-Eagle and chairman of the Los Angeles regional Jeep-Eagle dealers association, called the proposed ban an unfair punishment that would cause far more harm to dealers and their employees than to the car maker.
“We have 75 employees here. What do they do if we run out of product to sell?” he asked.
But given enough warning, Chrysler could build up its inventories ahead of time to try to ensure a ready supply for buyers, analysts say.
“It depends on exactly how the ruling is written and how Chrysler would interpret it,” said George Peterson, president of AutoPacific, an automotive consulting firm in Santa Ana. “Chrysler could front-load its shipments [before a suspension] so that its inventories could carry it over the 60-day time period.”
Dealers, meanwhile, would be allowed to continue servicing vehicles and selling parts.
Out of 1.5 million new-vehicle registrations in California last year, Chrysler accounted for about 11%, according to R.L. Polk Co., a marketing research firm in Detroit.
Times staff writer John O’Dell contributed to this report.