Chrysler Motors Corp. was indicted yesterday on charges of disconnecting odometers on 60,000 cars driven by its executives, then selling the vehicles to dealers and consumers as if they were new, even after some had been in serious accidents.
Millions of cars were similarly sold under a program that began in 1949, according to the 16-count indictment that charged the nation's third-largest domestic automaker with conspiring to commit mail fraud, wire fraud and odometer fraud. The indictment covers an 18-month period in 1985 and 1986 when Chrysler sold 60,000 of the automobiles.
The indictment alleges that consumers bought automobiles with no registered mileage that had actually been driven for as long as five weeks, and in some cases more than 400 miles, before the odometers were reconnected or replaced.
If convicted, Chrysler would face $120 million in fines. Two senior executives also were named in the indictment returned by a federal grand jury in St. Louis.
Chrysler said yesterday that the Justice Department is attacking "a legitimate quality-assurance program, beneficial to consumers, by attempting to apply to the quality testing of new vehicles a federal statute designed to preclude the rolling back of odometers on used cars. The law has never previously been applied in such a circumstance, or to an automobile manufacturer."
A Justice Department spokesman said that car manufacturers are covered by the odometer-fraud statute.
Chrysler called the proposed fines "an outrage." It said in a statement that cars were driven an average of 40 miles and were "fully repaired" if necessary under the testing program designed to iron out bugs in its product lines.
The company said it has stopped disconnecting odometers, put a 65-mile cap on the "test-drive" period and begun notifying dealers of the practice.
In an 18-month period from July 1985 through December 1986, Chrysler sold as new more than 60,000 cars that company managers had driven to and from work and on personal errands while the odometers were disconnected.
The indictment cited at least 40 cases in which Chrysler LeBarons, Omnis, Dakotas, New Yorkers, Daytonas and Ramchargers have been sold as new after being involved in accidents so severe that the frames were bent or doors damaged.
In one instance, a 1987 Plymouth Turismo driven by a Chrysler executive hit a pocket of water on a highway, flipped on its side, slid into a ditch and rolled over on its roof, the indictment said. After the car was repaired and its odometer reconnected, it was allegedly shipped to a dealer as a new vehicle.
The charges followed an eight-month probe by U.S. Attorney Thomas Dittmeier in St. Louis, the U.S. Postal Service and Missouri authorities.
Each major U.S. automaker has a quality-assurance program in which employes drive vehicles for a period of time to detect flaws. These cars are generally sold at a discount as "used" cars, either to company employes or through new-car dealers.
Spokesmen for General Motors and Ford Motor Co. said their companies would not allow odometers to be disconnected on test cars, and that dealers are informed that the cars have been previously driven.
According to Dittmeir, consumers cannot independently determine whether their cars were tampered with. He said his office would try to contact owners of such vehicles.
Clarence Ditlow, executive director of the Center for Auto Safety, said the Chrysler program may be "honest and legitimate in its aims, but the way they did it, it looks sneaky."
The indictment listed a series of corporate memos dating to 1976 in which Chrysler executives ordered odometers disconnected during the test-drive period.
In 1981, Frank J. O'Reilly and Allen F. Scudder, the two plant managers named as defendants, ordered plants in the United States and Canada to disconnect odometers on test cars "to avoid complaints from Chrysler dealers," the indictment said.
In Chrysler plants in Michigan, Missouri and Illinois, employes have been ordered to roll back odometers on cars that had been driven "too many miles" by Chrysler executives, the indictment said.
Last summer, although Missouri authorities had already told Chrysler to stop allowing cars to be driven with disconnected odometers, the company told its St. Louis executives not to tell police about the disconnected devices if they were stopped for speeding, the indictment said.