Allpar.com

The 2.7 liter engine had a tendency to generate sludge which caused engine failure. Similar problems have been appearing on Toyota and Volkswagen engines. We were told that, shortly after the first reported cases, Chrysler isolated the problem to the crankcase ventilation system; hydrocarbons were entering the oil and breaking down the additives. This problem has been solved (around 2002-2004), and the number of engine failures appears to be small. However, if you have an engine that might have this problem, frequent (4,000 mile) oil changes, vigilance, and crankcase ventilation system maintenance (or replacement with newer parts?) may be an answer. We have been getting numerous reports from readers complaining that Chrylser is not standing behind these engines.

Wikipedia.org: http://en.wikipedia.org/wiki/Oil_sludge

Some of the 2.7 L V6 engines have suffered from failures due to oil sludge contamination. These problems happen when fine engine oil passages become clogged with sludge, and often result in catastrophic failure of the engine (see below). Improper maintenance, such as irregular oil changes would see such results. An unknown number of Intrepid owners have been affected. Fixes include changing to synthetic oil, inspection, and even engine replacement. The base model continued to use the ordinary four-speed automatic, while the ES featured AutoStick as standard equipment.

OilSLudge.com

Since 2001, the most commonly reported problem has been engine failure or timing chain problems with Chrysler's 2.7l engine, all caused by oil sludge. The oil sludge is produced by an apparent design defect with the 2.7-liter engine.

However you decide to fix your blown 2.7L V6 engine, do not put in another defective 2.7L engine. Find a mechanic to swap up to a 3.2/3.5L engine instead. Here's why:

* The 3.2/3.5L engine doesn't have the design defect that causes oil sludge to form in the 2.7L V6.
* The 3.2/3.5L engines are less expensive than the 2.7L, sometimes by $1,000 or more.
* The 2.7L to 3.x swap is fairly straightforward & does not require any custom parts or other major components be replaced.

Some companies sell "fixed" 2.7L V6 replacement engines that supposedly have been modified to fix the oil sludge defect. We have not heard back from enough owners who have gone this route to be able to form an educated opinion on this method. Usually though, the cost of the modified 2.7L engine is prohibitive.