Report: Chrysler Makes Lemonade

NHTSA Probes Separate Complaints About Airbags That May Not Work

(CBS)  As the government steps up its investigation into 2.8 million DaimlerChrysler AG minivans with air bags that may not deploy in crashes, there is evidence that Chrysler has resold thousands of vehicles it recalled for defects.

A safety group said Chrysler documents show the company has spent $1.3 billion since 1993 buying back vehicles with chronic defects, then reselling the bulk of these "lemons" to consumers.

The automaker said the documents unsealed last week in North Carolina show no wrongdoing and are being mischaracterized by consumer groups and product-liability attorneys.

"The notion that this company engages in wrongdoing is total distortion," Lew Goldfarb, Chrysler's associate general counsel, said Monday.

Meanwhile, National Highway Traffic Safety Administration said in a report issued Monday that at least 164 Chrysler minivan owners have complained about a problem with the clockspring assembly, the system that provides electricity for the driver side air bag, horn and cruise control (see box).

In two cases, minivans crashed, and the air bags did not deploy. Two people were injured in the crashes.

Chrysler was bought by Germany's Daimler-Benz in 1998 and is now a unit of DaimlerChrysler. The firm is trying to ride out serious financial trouble due to slowing sales and legal problems stemming from the merger.

Alarm Over Airbags

The NHTSA investigation involves 1996 through 2000 models of the Dodge Caravan and Grand Caravan, Plymouth Voyager and Grand Voyager and Chrysler Town and Country.

Most of the complainants said the air bag readiness indicator lamp came on and some said the horn or cruise control did not work. The NHTSA said that the air bags probably would not have worked, either.

DaimlerChrysler sold 124,511 replacement parts for the clockspring assembly on those models besides the complaints, according to the report.

DaimlerChrysler spokesman Dominick Infante said the company is cooperating with NHTSA and conducting an internal investigation.

"At the moment it is just an investigation, there is no recall," he said. "It's very low numbers statistically."

NHTSA opns any investigation with a preliminary evaluation in which the agency exchanges paperwork with the manufacturer. The case can be upgraded to an engineering analysis, as in the case of the minivans, where investigators examine parts to see if they are defective.

Investigations can lead to a recall, but many are dropped.
(AP)

In November, a major stockholder sued the company, alleging Daimler didn't disclose its real intentions during merger talks.

In January the company announced 26,000 layoffs.

According to the documents revealed by the safety group, Chrysler said it repurchased more than 50,000 vehicles with persistent mechanical problems, then recouped about two-thirds of the investment reselling the majority of them at auction to dealers.

The papers show "the extensive corporate-level involvement in a process that historically had been dismissed as the misbehavior of a few rogue dealers," said Ralph Hoar, head of Safety Forum, an advocacy group that posted some of the documents on its Web site.

Chrysler said dealers are always told which vehicles have been bought back from customers, and must relay such information to consumers.

"The dealer knows he has an obligation to transmit the information to customers, and if the customer is unhappy, we will go after the dealer for noncompliance," Goldfarb said.

The Alliance of Automobile Manufacturers said automakers fix vehicles before they are resold through auctions, with dealers given disclosure statements saying why a vehicle was repurchased.

Because of liability concerns, automakers "do everything they can to get disclosure out," said John Whatley, the alliance's vice president and general counsel. "You're relying on the dealer to pass those notices on through" to consumers.

But consumer advocates say "lemon laundering" is widespread and want the Federal Trade Commission to require automakers to tell consumers about their duds. A few years ago, the FTC held hearings on lemons at the request of the consumer groups, but no action has been taken.

Phil Nowicki, a consultant on lemon laws, estimated that 75,000 of the roughly 45 million used vehicles sold yearly nationwide have been repurchased by the manufacturer under a lemon law decision or settlement. He believes few consumers are aware they have bought a repurchased vehicle.

Under a plan by consumer groups, a used car buyer could check the vehicle's identification number on an Internet database to find out if the manufacturer bought back the vehicle from an unsatisfied customer. The groups would like each search to be free or cost no more than $2.

Consumer groups also want a permanent label affixed to the car identifying it as a "lemon law buyback."

Auto industry groups say that while they support ful disclosure of a vehicle's history, they object to labeling every buyback a lemon.