Chrysler penalty reversed by board
Firm faced suspension under state lemon law


Ann Bancroft ASSOCIATED PRESS

21-Aug-1997 Thursday

SACRAMENTO -- The state New Motor Vehicle Board yesterday reversed a
decision by the Department of Motor Vehicles to slap Chrysler Motor Corp.
with a 45-day suspension of its business license for violations of the
California lemon law.

Attorneys for the automaker said they were delighted; a consumer advocate
said the ruling was "kind of stunning."

The nine-member board, which normally hears disputes between dealers and
manufacturers, observed in a 25-page written order that its "primary
purpose is the protection of dealers."

The panel found that the proposal to prohibit Chrysler from shipping new
vehicles to its 240 California dealerships for 45 days would cost each
dealer nearly $60,000 and "disproportionately affect dozens, if not
hundreds, of dealers who have not been accused of any wrongful conduct."

In all, the sanctions could have cost Chrysler up to $14.2 million, the
panel said.

The board also accused the DMV of improperly withholding from evidence
internal memorandums showing that DMV officials were uncertain how the
lemon law should be enforced. The board sent the matter back to the DMV,
ordering the department "to take additional evidence and reconsider its
decision in light of this order."

Chrysler also had faced possible fines and a three-year ban on resales of
vehicles bought back from dissatisfied customers. The DMV imposed the
sanctions in May 1996 over 116 alleged violations of California's lemon
law, a decade-old statute intended to protect consumers against problem
cars.

A car is considered a lemon if, during the first year or 12,000 miles the
car is owned, it needs four or more repairs for the same problem or has
been in the shop for service a total of 30 days. Dealers who buy back cars
classified as lemons are supposed to identify them as such, including
"branding" the title issued by the DMV.

In hearings before a state administrative law judge, the DMV said
Chrysler's violations included failure to notify used-car buyers that
vehicles it bought back from disgruntled customers had been labeled lemons,
failure to provide warranties and failure to notify the DMV so the
vehicles' titles could be branded.

Rosemary Shahan, spokeswoman for Consumers for Auto Reliability and Safety,
said yesterday's ruling was deeply disappointing.

"There's nothing about consumers in there," she said.

"The DMV has put so much time and effort into this," Shahan said of the
complaint, first brought by the department in 1994. "It's amazing they've
stood up to Chrysler for as long as they have."

Chrysler Corp. attorney Lewis Goldfarb said in a prepared statement that
the company was "delighted by today's ruling."

He added: "We hope that the ruling will bring to a close this unfortunate
action."