California Department of Motor Vehicles Bans New Chrysler Shipments to State

10/21/96

Reuters has reported that last Thursday, the California's Department of Motor Vehicles banned Chrysler from supplying any new vehicles to its dealers in the state for 45 days. The decision arises from Chrysler's various violations of California's "Lemon Law". The ban is supposed to take effect on Nov. 25, and will prohibit the carmaker from shipping any new vehicles to California, but will not prevent dealers from selling vehicle they have on their lots.

In May, a judge found Chrysler guilty of 116 violations of the state's Lemon Law for reselling used vehicles as new cars. The carmaker took vehicles that had been returned to dealers because they were lemons, and resold them without notifying the second buyers that they were purchasing used vehicles. California's lemon law requires carmakers to buy back cars that spend 30 days in a repair shops during their first year with their first owners, or if they can't correct a specific problem after 3 attempts.

Chrysler denies any wrongdoing and says it plans to appeal the judge's decision. In the original decision against Chrysler, Judge Keith Levy recommended a 60-day suspension of Chrysler shipments, but California's Department of Motor Vehicles (DMV)reduced it to 45 days after dealers complained the penalty would seriously hurt their business.

Sally Reed, Director of California's DMV said, "the action taken today is taken against Chrysler Corporation, not corporation dealerships in California. Prohibiting the restocking of vehicles for 45 days, coupled with other sanctions, sends the strongest message to Chrysler Corporation, but should have less effect on innocent parties."

The agency's sanctions against Chrysler ban the corporation from re-selling Lemon Law buybacks and good-will repurchases within the state for three years. The DMV also put the No. 3 U.S. automaker on probation for three years.

Clarence Ditlow, executive director of the Centre for Auto Safety in Washington, D.C. and a consumer advocate said, "this is the equivalent of putting a corporation behind bars by taking them off the street. It's a landmark day for consumers."

He added, "the only way to stop lemon laundering is to suspend a corporation from doing business. If you fine them, they ignore it, they consider it a cost of doing business and they continue laundering lemons."

Chrysler said they plan to delay the implementation of the penalty by tying it up in appeals until it is overturned or the appeals process is ended. Chrysler will first appeal the decision to California's New Motor Vehicle Board, an independent body set up to review regulatory decisions on cars and trucks in California.

Instead of concentrating on the charges against them, Chrysler's appeals of the decision rest on the argument that the decision will hurt the state economically. Chrysler has said, "the DMV had asked the administrative law judge to review the economic impact of his earlier decision. California dealers presented substantial, unrefuted evidence of economic harm to their dealerships and California consumers.

"The DMV has essentially ignored this evidence of harm to California citizens, just as it ignored evidence of Chrysler's compliance with California law."

Paul Dever -- The Auto Channel