 Bo and Luke are skinny-dipping in a local pond when two pool hustlers steal both the cousins  clothing <i>and</i> the General Lee. Rosco soon pursues who he thinks are the Duke boys, but the crooks drive the stolen General Lee into the lake. When nobody is found with the car, Rosco tearfully announces that Bo and Luke have drowned. Bo and Luke arrive home safe and sound, then learn that Boss has used their alleged "deaths" to implicate them on the theft of his gold watch (so he can collect fraudulently collect the insurance money). The Duke boys and Cooter concoct a scheme to turn the General Lee into a "ghost," and haunt Boss and Rosco until they admit their scheme.