By on May 9, 2009

When life gives you lemons, you make lemonade (or glazed strawberry lemon streusel muffins). When Chrysler gives you lemons, you’re SOL. Since April 30, Judge Arthur Gonzales has to approve payment on claims against Chrysler incurred before C11. That includes “lemon law” settlement checks to customers who bought defective Dodge, Chrysler or Jeep products. Not happening. “San Diego attorney Ellen Turnage represents a client who reached a settlement with Chrysler over a 2006 Dodge Magnum with a bad suspension. The car has been returned to Chrysler, but the automaker’s check bounced. ‘Now he’s got no car and no money, so he can’t go buy a new one,’ Turnage said of her client. ‘He’s stuck. We’re hanging on to a glimmer of hope that at some point this will all be resolved.’” As the LA Times reports, Turnage’s pessimism is well-justified. Instead of saying, sorry, we’ll expedite this, the new Chrysler is telling aggrieved customers to FO&D.

The company said it had no plans at this point to ask the bankruptcy judge to approve payments to settle lemon law complaints. “This is a complex process and there are a lot of issues being discussed,” said Chrysler spokesman Mike Palese. “This could be one of those issues that comes up in the course of the bankruptcy, but I can’t say that we have any plans to present it at this time.”

Chrysler advises customers with pending lemon law complaints to file a proof of claim form with the Bankruptcy Court and join the ranks of the automaker’s unsecured creditors.

“In that case, you’ll be lucky to get pennies on the dollar,” [Atlanta attorney Alex] Simanovsky said.

Can we see the details on that government-backed warranty now, please? [thanks to pixarwolf for the link]

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30 Comments on “Chrysler Walks Away from Lemon Laws...”


  • avatar
    Ingvar

    Well, this should answer the “Why should anybody buy a car from a bankrupt maker” once and for all.

  • avatar
    Bill Wade

    Ingvar :
    May 9th, 2009 at 6:26 am

    Well, this should answer the “Why should anybody buy a car from a bankrupt maker” once and for all.

    Yep.

  • avatar
    97escort

    At lot of people get ripped off in bankruptcy. That is the whole point of it. How else can the bankrupt party start anew? Don’t get involved in it if you are smart.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=abd7cTYxFovI&refer=home

  • avatar
    Geo. Levecque

    At least in the USA you have a Lemon-Law, unlike here we don’t have one!
    I think the smart thing to do is not purchase a vehicle from the likes of Chrysler, no matter how much they give you as a sort of a “gift” to buy one of there Products.

  • avatar
    windswords

    This is not Chrysler’s fault. It is Judge Gonzalez who made the ruling. He should have upheld lemon law cases, I don’t see how they could be a factor in a company reorganization. I don’t believe that bankruptcy should be used to absolve responsibility from following the law when it does not relate to debt, employee, and stockholder obligations. Gonzalez might as well rule that Chrysler doesn’t have to follow safety or environmental regulations as well. After all that would save them money, right?

  • avatar

    windswords

    Gonzalez didn’t make any ruling in this regard. As the ChryCo rep states, Chrysler has not put this issue before him. Nor does the new Chrysler have any immediate plans to do so. And if it does, it will not assign the claim any special priority.

    And yet, it’s our tax money keeping Chrysler alive.

    Shame on Chrysler for not standing behind their products during this, their time of need, during this, their customers’ hour of need. Shows where the automaker’s priorities lie, even now.

  • avatar
    shaker

    This makes no sense – further decreasing market share by scaring away potential customers who have no legal recourse regarding “lemons” defeats the purpose of the bailout.
    I expect a ‘fix’ in the near future. (Does not hold breath, however.)

  • avatar
    kaleun

    and you didn’t think there is something wrong with the car when they gave you $ 5,000 cash to buy it?
    C’mon, Chryslers are lemons by design…. if you can return a car because it is S.H.I.T. then all the Sebrings woudl be off the street.

    I buy Honda, Mazda, and the like. whne the chrysler dealer next door offers me another $ 5,000 incentive, then that even makes me more sure that i make the right choice not buying it.

    too bad for that individual, no car, might lose the job becuase of lack of car, … all because of a bad car choice.

  • avatar
    mach1

    Chrysler should give the guy a new vehicle. They sure have a bunch of them sitting on the lots.

  • avatar
    lw

    FO&D… LMAO.. Haven’t seen the abbreviation for a long time…

    Don’t get anywhere near Chrysler or GM… I love GM vehicles… Bought my last one 12 months ago… It’s been a great ride.. Just one minor recall to reprogram the computer.

    I assumed that in 6 months I would know if it was a lemon and courtesy of the US Government I got 12-14 months to drive it pre- Ch 11.

    If Chrysler vehicles were all 50% off with 0% financing or a half off with an extra 10% cash discount you would be in the right ballpark to consider one.

    The problem is that the dealers paid full price for them and the factories are shut down. People expecting great deals from a dealer just don’t understand the business.

    The deals will be had from auctions held by Chrysler financial and GMAC and Joe Six pack won’t have access.

  • avatar
    PeteMoran

    @ mach1

    Nice one. No one’s gonna’ buy them after-all.

  • avatar
    Pch101

    Gonzalez didn’t make any ruling in this regard. As the ChryCo rep states, Chrysler has not put this issue before him. Nor does the new Chrysler have any immediate plans to do so. And if it does, it will not assign the claim any special priority.

    Now that BK has been filed, there should be a trustee or receiver who is overseeing every payment that the company makes, and everybody who has a claim from a time prior to the filing has to get in the queue. That’s for the protection of the creditors, to ensure that any money that might be available to them isn’t misappropriated.

    We’ve had a lot of talk about secureds vs unsecureds here. Well, those who defended the alleged holy sacred status of the Non-TARP Saviors of America (TM) should remember that the hedge funds have a superior claim to the poor bastard who bought a crappy car and who now wants to collect the judgment to which he is entitled.

    Given what has happened, the DIP lender of the new company should step up and pay out these people, because otherwise it’s coming out of the pockets of the secureds. (Oh, the DIP lender is us. As in the US taxpayer.) And God knows, we wouldn’t want to hurt the poor, oppressed secureds.

  • avatar
    Robert Schwartz

    Hey, not to worry. You are covered:

    “If you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired, just like always,” President Obama said during a speech from the White House. “Your warranty will be safe. In fact, it will be safer than it’s ever been, because starting today, the United States government will stand behind your warranty.” [link]

    Call or write.

  • avatar
    Pch101

    What is your problem?

    I’m frankly surprised that you’re not upset with the people who made the Lemon Law claim. This criminal enterprise of ChryCo customers had the audacity to try to jump the queue with their unsecured claims. How dare they?

    Where is your outrage? Shouldn’t you be up in arms about the little people in their quest to push the hedge funds out of their righteous, lofty first position?

  • avatar

    Let us keep in mind the big 3 fought lemon laws at every single turn. Here in NY, they even fought you in Court AFTER losing at arbitration, until that was stopped.

    Delco Parts are going to get sketchy. Chrysler is already dead.

    I would now only buy big 2 at a substantial discount.

  • avatar
    RedStapler

    I could build an entire Jeep CJ with nothing but aftermarket parts.

    Rare parts for oddball low volume models are going to become difficult to impossible. Someone will fill the need for common parts for vehicles with a large installed base.

    So if you have a 2008 Chevy Pickup you should still be able to get parts from somewhere. If you were one of the handful who bought a Yukon Hybrid you’re SOL.

  • avatar
    Hippo

    At least 50% of people with lemon law claims buy these discounted POS and then expect high grade performance.

    Eventually they realize that depreciation eats a lot more then the discount and they start making up defects that only exist in their mind.

    Joke is on him, to the end of the line.

  • avatar
    Conslaw

    I used to make a significant part of my living doing lemon law cases. If I were still doing that, I wouldn’t take a lemon law case against GM or Chrysler right now. There’s too much risk that neither the car buyer nor the attorney will get paid. I suspect we’ll be seeing a lot of cars out of service more than 30 days just because of parts shortages. There will be lots of “lemon” cars but the traditional remedies will not be available.

    If you are settling a lemon law case right now (and I bet they’re not easy to settle these days), I would recommend that you put a provision in your settlement agreement that the car buyer retains a security interest in the lemon vehicle until they receive their buyback money.

    In a separate matter, a lot of employees are still in the process of being bought out. If the employee signed the buyout agreement and hasn’t been paid the buyout money at the time bankruptcy is filed, is that an executory contract that the automaker can default on with impunity? Does the worker have call back rights?

  • avatar
    John Horner

    “At least 50% of people with lemon law claims buy these discounted POS and then expect high grade performance.”

    Any proof of your assertion? About 10 years ago we got a 100% refund on a Chrysler Town & Country because the dodos could never get the instrument panel lights to work reliably. At the time it was a high demand vehicle with no cash-on-the-hood.

    Believe me, I would have much rather they simply fixed the stupid lights, but nope … it was easier to get the lemon law buyback from them than it was to get the stupid thing fixed.

    Needless to say, I haven’t been in a Chrysler showroom since.

  • avatar
    NickR

    Any chance of me buying a Chrysler (Challenger, or possibly a massively discounted 300 or Charger R/T) just evaporated.

    At least in the USA you have a Lemon-Law, unlike here we don’t have one!

    Word. Here we have CAMVAP. I’d prefer lemon laws any day.

  • avatar
    kurtamaxxguy

    Sadly, this portends what will happen if GM goes C11 (which is looking more likely every day).

    Given the complexity of todays’ cars, their makers will make an occasional lemon. Losing the final option of returning car for money/another car, would make me very hesitant about buying it.

    Also, there are a few states in the USA which have very little provisions for dealing with Lemons (Oregon is one).

  • avatar
    Hippo

    Any proof of your assertion?

    Sure, to my satisfaction.

    I have purchased several vehicles at very good prices that were lemon law buybacks. On all but one of them there was nothing wrong, and the other one was pretty easy to fix.

  • avatar
    hughie522

    Huh.

    And here was I thinking New Chrysler needed customers.

    I suppose New Chrysler will have New Customers?

    Because the Old Chrysler Customers will buy something else :P.

  • avatar
    GS650G

    Drive the dodge lemon right through the dealership window. You won’t get money or a car but you will get satisfaction.

    When they tell you that you’re going to pay for the damage tell them to take it out of the lemon law check and call it done.

  • avatar
    Robert Schwartz

    I have no outrage for private persons who make their own case. Everyone is entitled to do that. It is a right enshrined in the 1st amendment.

    The poor saps who bought a Chrysler product and who have suffered a total loss, are more to be pitied than censured. If they are unsecured creditors they will get, what is called in Bankruptcy Latin, bupkis.

    They have a right to be peeved that the UAW will receive value when they will not.

    My outrage is reserved for the public officials who are driving this process.

    Apparently some folks believe that people should receive based on their moral status. Unions good. Chrysler customers poor innocents. Hedge funds bad.

    This is very problematic as a theory of justice. None of us would stand up to scrutiny. All of have sufficient evil in our hearts, and in our deeds, that we would be found unworthy. Christopher Hitchens wrote an indictment of Mother Theresa.

    In the hands of the crooked or the incompetent, friends, relatives and tribe members will be preferred. The ultimate injustice will become that only the loyal minions of the powerful receive, and everyone else learns about the nobility of want.

    The correct doctrine is do no injustice in judgment; do not be partial to the poor or favor the great, but judge every one fairly according to the law.

  • avatar
    Kurt.

    This issue isn’t about the Chrysler walking away from the Lemon Law. Chrysler PAID as it was supposed to. The client got “a check”. The issue now is that the check bounced! That is an issue for the BK Judge and the trustee(s) of the company to sort out as now you are just another dept – waiting in line for your share.

    What some here are complaining about is that the Administration is politically reorganizing the priority list (and I would add “rather than the company”) instead of the BK judge. I would suspect normal bounced checks would fall somewhere pretty low on the payout list but that Lemon Law checks might get moved up the list because of the Prez’ statement about supporting warrenties.

  • avatar
    windswords

    Robert Farago

    If Chrysler has not put this issue before him, then Judge Gonzalez has made a unilateral decision, one which I disagree with. The fact that “the new Chrysler [does not] have any immediate plans to do so” is not indicative of a sin of omission on their part. I would think (actually know, because my company went thru a C11 reorganization) they are quite busy with other pressing matters right now. There’s no there there.

    Automotive News, citing kbb.com and Edmonds.com, reports that at least in the near term bankruptcy is not a purchase deterrent for Chrysler vehicles.
    http://www.autonews.com/article/20090511/A…/305119984/1078

  • avatar

    windswords

    What’s more pressing that customer care? Without customers, there is nothing. Not now, nor in the future. Lest we forget, every disgruntled customers tells at least 10 other people not to buy from the offending seller.

    As for the other link, I’ll have a look. But I’ve deleted it here because it’s off-topic. In future, please send all comments about TTAC’s editorial stance or style, and tips and links, to robertfarago1@gmail.com.

  • avatar
    Pch101

    My outrage is reserved for the public officials who are driving this process.

    A bankruptcy would have been filed, anyway.

    The difference is that the government may pay these claimants. Had the government not been involved, the odds of them ever seeing the money would be about 0%, because the secureds would be entitled to take 100% of the tiny cash pie that is available to pay the creditors in this case.

    You’ve gone at length about your belief in absolute priority as an absolute doctrine, so it’s surprising that you didn’t pound on that argument here.

    Perhaps that’s because absolute priority was probably not really your first concern, and your position has a lot more to do with your angst over the alleged value of the VEBA’s worthless stock, even though it seems likely that the VEBA would have creditor priority over a lemon law litigant. Your absolute priority must be to make sure that the union gets zero, regardless of whatever rights it may have as a creditor in this case.

  • avatar
    slumba

    This doesn’t make a lot of sense. If the check bounces you can go to court and get treble damages; should be simple and fast.


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