GM sues Fiat Chrysler using organized crime laws

GM sues Fiat Chrysler using organized crime laws

FCA officials bribed UAW to drive up GM costs so FCA could take over GM, automaker alleges in the lawsuit.

November 21, 2019

Cleveland, Ohio – Detroit’s largest automaker is taking swings at No. 3 in federal court with General Motors accusing Fiat Chrysler Automobiles (FCA) of bribing United Auto Workers (UAW) leaders to force GM into FCA’s arms.

Though the suit discusses several indicted and convicted UAW officials, GM’s suit is clear that its complaint is not with the union or its members but with FCA.

Cutting through the legalese, the GM suit claims:

  • FCA officials offered more than $1.5 million in bribes to several UAW officials in a scheme directed by late CEO Sergio Marchionne.
  • FCA used the favorable position it gained with the UAW to win lower labor costs than Detroit’s other automakers.
  • FCA used its favored position with the union to become the lead negotiator in 2015 contract talks, and the2015 contract included cost structures that favored FCA instead of GM.
  • The goal of the higher costs was to force GM to merge with FCA, a goal that Marchionne discussed publicly often.

“This case is about an Italian company, Fiat Chrysler Automobiles N.V. (FCA NV), which managed to win the support of the U.S. government in obtaining operational control, for no cash, over an iconic U.S. auto company, Chrysler Group LLC,” GM officials argue in their lawsuit. “Shortly after this government approved acquisition, FCA Group betrayed our government’s and the U.S. auto industry’s trust and embarked on a systemic and near decade-long conspiracy to bribe senior union officials to corrupt the collective bargaining process and labor relations.”

Following the bankruptcies of GM and Chrysler Group in 2009, the Obama administration gave Chrysler to Fiat in exchange for the promise to keep several plants open and to bring small car designs to the automaker. While the FCA Group repaid some federal loans tied to the bailout, it never offered any payment for taking over Chrysler.

FCA officials called the lawsuit meritless and pledged to vigorously defend the company against its claims.

“We are astonished by this filing, both its content and its timing. We can only assume this was intended to disrupt our proposed merger with PSA as well as our ongoing negotiations with the UAW,” FCA officials said.

The UAW has completed 2019 negotiations with GM and Ford but has yet to reach a new four-year contract with FCA. And, early this month, FCA agreed to merge with France’s Peugeot Citroen (PSA Group) to fulfill the company’s longstanding desire to grow to meet upcoming industry challenges.

GM’s lawsuit leans heavily on indictments and guilty pleas involving UAW corruption, mainly dealing with FCA. More than a dozen UAW and FCA leaders have faced criminal charged from the ongoing probe, and 11 have pleaded guilty. The UAW on Wednesday moved to oust current President Gary Jones from his leadership position and the union for allegedly filing inflated expense reports.

In its lawsuit, GM alleges that the goodwill FCA purchased by bribing UAW officials saved the company millions of dollars – benefits that GM and Ford were not offed by the union.

“In 2014, FCA and the UAW agreed to a formulary that would make better use of prescriptions that are widely available, significantly reducing FCA’s health care costs,” GM officials claim in the suit. “The formulary would have saved GM up to $20 million per year. Negotiators for GM repeatedly requested FCA’s more cost-effective formulary during collective bargaining, but the UAW refused to agree, indicating the term would rankle UAW leadership.”

While GM’s suit states directly that it is not attacking the UAW, the union issued a statement Wednesday addressing allegations.

“As to the collective bargaining agreements negotiated with FCA while (former FCA employee relations vice president Alphons Iacobelli who is in jail following a guilty plea for tax cheating and violating labor laws) was an FCA manager, we are confident that the terms of those contracts were not affected by Iacobelli’s misconduct, nor that of any UAW officials involved,” UAW leaders said. They add that local union leaders help negotiate contracts and the union’s membership ratifies them, putting checks and balances on the system. “The fact that these issues can cause doubt about the contracts is regrettable. The UAW leadership is absolutely committed to making whatever changes are necessary to ensure on our end the misconduct that has been uncovered will never happen again.”

About the author: Robert Schoenberger is the editor of Today's Motor Vehicles and a contributor to Today's Medical Developments and Aerospace Manufacturing and Design. He has written about the automotive industry for more than 19 years at The Plain Dealer in Cleveland, Ohio; The Courier-Journal in Louisville, Kentucky; and The Clarion-Ledger in Jackson, Mississippi.