DaimlerChrysler Settles ‘Lemon’ Suit
DaimlerChrysler has settled a long-running lawsuit brought by the California Department of Motor Vehicles, agreeing to pay the DMV $325,000 in a “lemon” law case that alleged the auto maker resold defective vehicles to consumers.
The settlement was immediately criticized by consumer advocates as too lenient.
The company admitted no wrongdoing and was able to put an end to a suit filed by the DMV in 1994 alleging that the then-Chrysler Corp. repurchased and resold 119 defective Chrysler, Plymouth, Dodge and Jeep vehicles without telling buyers of their histories of problems and in some cases without repairing them.
DaimlerChrysler denied it concealed defects in cars it repurchased. “We have always complied with California lemon laws in terms of disclosing vehicles’ repair history and sharing those with customers,” DaimlerChrysler spokeswoman Ann Smith said Thursday. “We’re certainly pleased we finally reached an agreement to this long-standing dispute.”
After initially denying that there was a settlement, the DMV issued a brief statement late Thursday acknowledging the payment, which went to attorney fees and investigation costs to settle the complaint.
As part of the settlement, the DMV dropped the 45-day suspension of the company’s license to do business in California that it had been seeking.
“I am very happy to have it resolved,” DMV Director Steven Gourley said. “It has gone on now through four different DMV directors, and it was time to get it resolved. We think any manufacturer will think twice about trying to bring lemon vehicles into California.”
Car buyers and consumer advocates expressed disappointment with the deal.
“That’s pretty shocking. That’s not very much money,” said Terri Skogebo, a schoolteacher in Antelope whose 1989 Plymouth Colt Vista was one of the 119 cars involved in the suit.
“That’s truly a superficial amount and really a victory for Chrysler, if they get away without admitting guilt,” said Harvey Botwin, a professor of economics at Pitzer College in Claremont who teaches a course called “Cars and Culture.”
Rosemary Shahan, president of the Sacramento-based advocacy group Consumers for Auto Reliability and Safety, agreed that Chrysler got off easy. “I’m sorry Chrysler wasn’t banned for at least one day, because what they did was endanger people, and I don’t think the penalty fits the crime,” Shahan said.
California has one of the nation’s first lemon laws,enacted in the early 1980s. Under the law, new vehicles on which repairs have been unsuccessfully attempted four times--or two times in the case of life-threatening defects--or that have been out of service for 30 days during the first 18 months or 18,000 miles must be repurchased by the manufacturer and have their titles branded as “lemon law buyback.”
The vehicles then may be resold, sometimes in the same state, but must be identified as lemons. That generally brings the price down about 25%, said Clarence Ditlow, head of the consumer advocacy group Center for Auto Safety. Financial reasons can spur people to buy cars they know are damaged, if the price is low.
DaimlerChrysler has been hit with a number of lemon verdicts recently. In April, a jury in Illinois awarded $81,000 to a consumer who was sold a new Jeep Cherokee that had been damaged before purchase. In December, an Ohio jury ordered DaimlerChrysler to pay a woman $237,000 in damages for selling her a 1996 Chrysler Sebring that turned out to be laundered lemon.
DaimlerChrysler has not been alone in such cases. In December, Ford Motor Co. was ordered by a jury to pay a Fresno County couple $10 million for reselling them a used Taurus that Ford knew was defective, reportedly the largest award in a civil case of lemon laundering.
The jury said Ford had violated state law and committed fraud by repeatedly taking back defective vehicles from customers and reselling them while concealing their troubles.
“It’s endemic across the auto industry,” Ditlow said. In 1995, an estimated 100,000 lemon cars were bought back by manufacturers and resold at an average price of $20,000, which means additional revenue to auto makers of $2 billion, Ditlow said.
“It’s a huge problem. They feel they would lose a ton of money if they had to brand cars lemons,” said Dani Liblang, an attorney in Birmingham, Mich., who specializes in automotive defects.
