Iraq says it rejected a shipment of 12,000 Canadian-built Chevrolet Malibu automobiles because the cars suffered from bad clutches, were not equipped as represented by the maker and were poorly finished.

Iraqi ambassador to Canada, Abdo al-Dairi says the Malibus are one of the rewards the government presents to bereaved families of Iraqi war dead, the victims of the 20-month war with Iran.

Last week Iraq announced that it would not accept the $100 million worth of vehicles because the cars were in many cases faulty and the transmissions did not work.

General Motors of Canada, Ltd., the Canadian subsidiary of General Motors Corp. of Detroit, built the vehicles at its plant in Oshawa, Ontario. An earlier shipment of 13,000 Malibus was accepted by Iraq and paid for.

GM Canada applied in February for payment by Canada's Export Development Corp., a government agency that insures foreign trade, for payment on the rejected car shipment.

Meanwhile Canadian government officials have been helping GM Canada by trying to sell the unwanted vehicles as taxicabs in Columbia.

Canadian auto dealers show little interest in acquiring the vehicles partly because they have an unusual floor-mounted manual three-speed gearshift. The cars were designed for use in Iraq and have a high gear ratio, which makes them unsuitable for climbing even a modest North American hill.