On June 24, 1987, the U.S. Government issues a sixteen-count indictment against ChryslerCorporation and two high-level executives, charging that the odometers on selected new cars and trucks were disconnected prior to turning the vehicles over to Chrysler executives for up to six weeks of personal use. When the vehicles were returned, the odometers were reconnected and the vehicles were then shipped to dealers as new vehicles. The government claimed that the practice had been going on for the past thirty-eight years and some of the vehicles had been driven up to 400 miles. It was further claimed that some of the vehicles had been involved in accidents and then repaired with no notice of the accident provided to the new owner.

The government asserted that at least 60,000 vehicles had been involved in this practice between July 1985 and December 1986. Chrysler vice president Baron Bates challenged the charge that vehicles were given to company executives for extensive personal use. He defended the practice of testing cars with odometers involved randomly selected vehicles. Bates stated that the vehicles were driven home overnight for the purpose of isolating potential quality or safety defects. The vehicles were driven an average of forty miles with a few driven more than 65 miles. Chrysler further stated that fewer than 40 cars had been involved in accidents in the last ten years and that those cars had been fully repaired prior to being handed over to dealers for sale.

When the government began its investigation of Chrysler in October 1986, Chrysler stopped disconnecting odometers and limited the test drives to 65 miles. They also placed notices in the glove compartments of the test vehicles, advising buyers that the car had been involved in the testing program.

On July 1^st, 1987, Chrysler President Lee Iacocca defended the legality of Chrysler's actions stating: "The only law we broke was the law of common sense". He went on to express that the practice may have caused buyers to lose faith in Chrysler, faith that had been carefully nurtured since the government bailout. "We asked [customers] to trust us, and they did. Now they've been given reason to question that trust. Simply stated, that's unforgivable". In reference to the odometer disconnection, Iacocca stated: "Did we screw up? You bet we did. I'm damned sorry it happened and you can bet it won't happen again, and that's a promise".

Iacocca announced that Chrysler was extending the current give-year or 50,000 mile engine and power-train warranty on all vehicles involved in the testing program to seven years or 70,000 miles. In addition, the warranty was expanded to cover additional major systems including air-conditioning and brakes. Owners of all cars involved in the program were offered a free inspection. Owners of vehicles that were damaged during testing and then repaired prior to shipment were offered a brand-new car or truck of comparable value at no additional cost. Chrysler ran advertisements on television and in newspapers (see figure 1 below) apologizing for disconnecting odometers on test cars and outlining its compensation program. Iacocca was careful to note that the program was not considered a legal settlement by stating: "This is not a product recall. The only thing we're recalling here is our integrity".

Figure 1: Chrysler Advertisement

"Testing cars is a good idea.

Disconnecting odometers is a lousy idea.

That's a mistake we won't make again at Chrysler. Period" Lee Iacocca

LET ME SET THE RECORD STRAIGHT

1. For years, spot checking and road-testing new cars and trucks that came off the assembly line with the odometers disengaged was standard practice. In our case, the average test mileage was 40 miles
2. Even though that practice wasn't illegal, some companies began connecting their odometers. We didn't. In retrospect, that was dumb. Since October 1986, however, the odometer of every car and truck we've built has been connected, including those in the test program
3. A few cars- and I mean a few were damaged in testing badly enough that they should not have been fixed and sold as new. That was a mistake in an otherwise valid quality assurance program. and now we have to make it right

WHAT WE'RE DOING TO MAKE THINGS HAPPEN

1. In all instances where our records show a vehicle was damaged in the test program and repaired and sold, we will offer to replace that vehicle with a brand new 1987 Chrysler Corporation model of comparable value. No ifs, ands or buts
2. We are sending letters to everyone our records show bought a vehicle that was in the test program and offering a free inspection. If anything is wrong because of a product deficiency, we will make it right
3. Along with the free inspection we are extending their present 5 year or 50,000 mile protection plan on engine and powertrain to 7 years or 70,000 miles
4. And to put their minds completely at ease, we are extending the 7 year or 70,000 mile protection to all major systems: brakes, suspension, air-conditioning, electrical and steering

The quality testing program is a good program. But there were mistakes, and we were too slow in stopping them. Now they're stopped. Done. Finished. Over.

Personally, I'm proud of our products. - Proud of the quality improvements we've made. So we're going to keep right on testing. Because without it we couldn't have given America 5-year 50,000 mile protection five years ahead of everyone else. Or maintained our warranty leadership with 7-year 70,000 mile protection. I'm proud, too of our leadership in safety-related recalls.

But I'm not proud of this episode. Not at all.

As Harry Truman once said, "The buck stops here". It just stopped period.

CHRYSLER MOTORS

Question 1. Discuss the impact of the ethical issues on at least five (5) stakeholders in this case. (10 marks)

Question 2. Examine and analyse Chrysler's response to the situation. From your perspective what could have been done by Chrysler to present this practice from happening in the first place? What could haveChrysler done differently? (10 marks)