General Motors (GM) filed a racketeering lawsuit against Fiat Chrysler Automobiles (FCA) yesterday, alleging that FCA bribed United Auto Workers (UAW) union officials from 2009 to 2015, which caused GM billions during the bargaining process with the union. GM is also claiming that FCA’s former CEO, the late Sergio Marchionne was the central figure in the scheme.
According to the lawsuit, GM is seeking “substantial damages” from FCA, that the company says would be reinvested towards more jobs in the U.S., however, a specific number of jobs was not released.
The lawsuit comes hot on the heels of the news of the planned 50-50 merger between FCA and French automaker PSA. The merger would make the new company the 4th largest globally, surpassing GM. FCA is also at the bargaining table with the UAW at the current moment, negotiating a new four-year labor contract.
FCA released a statement late on Wednesday, saying that the company would “defend itself vigorously against the lawsuit.” The statement went on to say that “FCA believes GM’ claims are nothing more than a meritless attempt to divert attention from that company’s own challenges.”
An e-mail was sent from FCA CEO Mike Manley to employees this afternoon, which MoparInsiders has obtained.
Dear Colleagues,
As you may already know, General Motors filed today a lawsuit against FCA alleging that FCA engaged in acts that corrupted the bargaining process with the UAW union in a manner that somehow harmed General Motors.
The complaint rehashes a collage of salacious public allegations from pending NTC matter and at a first review, beyond unsupportable speculation, does not include any new factual allegations.
We have issued the following statement to the media in response: “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. We intend to vigorously defend against this meritless lawsuit and pursue all legal remedies in response to it.”
I am sure you have read this statement but I also wanted to reach out to you on a personal level to assure you that we will not be slowed down by this act.
So I will end by thanking you again for the work you have done and are continuing to do to create an amazing company. Let’s keep the performance up as it has clearly got some of our competitors worried.
Regards,
Mike Manley
GM Executive Vice President and General Counsel, Craig Glidden, told reporters at GM Renaissance Center headquarters in Detroit, that the lawsuit did not pertain to the planned merger with PSA. He went on to say that GM has no plans to file suit against the UAW.
FCA is the last of Detroit’s “Big-Three” that is still in contract talks. Ford Motor Company ratified a new contract last week with the UAW, while GM workers approved a new deal on a few weeks ago that ended a 40-day strike in the U.S. and caused backups for many suppliers.
When we reached out to PSA for their take on the situation, the company declined to comment.
“As part of this bribery scheme, and to lock in the competitive efficacy of the purchased benefits, concessions and advantages for FCA, GM was denied similar union commitments and support,” the lawsuit states. GM is also alleging that FCA under the leadership of the late Sergio Marchionne, used bribes given to UAW officials to corrupt the bargaining process from the start of his tenure at the helm of the company in 2009 to the last UAW negotiations four years ago.
After GM rejected a merger bid from FCA in 2015, the lawsuit alleges that Marchionne conspired to negotiate a new four-year contract that was “designed, through the power of pattern bargaining, to cost GM billions.”
GM claims that they were forced to pay higher wages than FCA, which allowed FCA to use more temporary workers and lower-paid second-tier workers than GM. The lawsuit also sights the names of three other former FCA executives who have pleaded guilty, for a multimillion-dollar corruption scandal involving the union and FCA. GM has also been under the hot seat dealing with some UAW scandals recently as well. You can read all about the charges and the investigation on both sides on Automotive News. The UAW has also been the focus of a spreading federal corruption probe that involves officials from the UAW, GM, and FCA.
UAW President Gary Jones, also announced on Wednesday that he was resigning from his position and retire effective immediately. The news came after the UAW’s International Executive Board voted unanimously to seek the permanent removal of Jones and Regional Director Vance Pearson, who also is on leave after being charged with fraud and embezzlement. Jones has not been charged with any crimes, despite recently being under investigation by the FBI. Jones’ attorney Bruce Maffeo told the Detroit News the decision was based “on his belief that his continuing to serve will only distract the union.”
While the UAW is looking to get the damage under control from the ongoing scandal, the acting UAW president unveiled a series of reforms designed to prevent further scandals in the future.
It is unclear how much farther the investigation will also dig up, but the lawsuit between GM and FCA showcases the bad blood between two of Detroit’s automakers. Stay tuned as we will continue to bring you more information as it is released.
