General Motors Co. hit Fiat Chrysler Automobiles NV with a blockbuster racketeering lawsuit, alleging a years-long bribery and corruption scheme that has sent United Auto Workers and Fiat Chrysler officials to jail cost GM billions of dollars by tainting union contracts as far back as 2009.
GM filed suit in federal court in Michigan on Wednesday seeking to recoup unspecified damages from its rival, known as FCA, which has in the past denied being aware three former executives conspired with UAW officials to undermine labor law. GM strikes at the heart of that defense, alleging that late Chief Executive Officer Sergio Marchionne himself authorized bribes with the ultimate aim of weakening a competitor and forcing a merger.
“The multi-year bribery scheme FCA led undermined the integrity of the collective bargaining process and caused GM substantial damages,” Craig Glidden, GM’s general counsel, told reporters at a briefing at the company’s Detroit headquarters.
GM and Fiat Chrysler shares both touched session lows on the news, falling as much as 2.4% and 3.4%, respectively. Representatives for Fiat Chrysler didn’t immediately comment on the suit.
GM alleges that Marchionne, who died last year, and three former company officials corrupted the collective bargaining process between the UAW and Detroit’s three automakers for several years from 2009 to 2015. That resulted in unfairly high labor costs for GM, putting the company at a competitive disadvantage, Glidden said.
The suit targets Fiat Chrysler and three former company officials who pled guilty and were sentenced to prison for their roles in the corruption scandal, including Al Iacobelli, who had served as vice president and lead UAW negotiator.
Competitive advantages provided to Fiat Chrysler but denied to GM included a higher portion of lower-paid workers, a streamlined grievance process and looser limits on use of temporary employees, according to GM.
In a statement after the suit was filed, the UAW denied the contracts were tainted and said there were “multiple layers of checks and balances” to ensure their integrity. “We are confident that the terms of those contracts were not affected by Iacobelli’s misconduct, nor that of any UAW officials involved in the misuse of Joint Program funds at FCA,” the union said.
Former UAW President Dennis Williams went against conventional practice in 2015, choosing Fiat Chrysler as the union’s negotiation target despite it being the smallest and least-profitable of the Detroit automakers. This was done at the behest of Marchionne to inflict higher costs on GM and force it to accept the then-CEO’s proposal to merge, the complaint alleges.
In a speech announcing the 2015 agreement with FCA, Marchionne said that the costs of the UAW contract “pale in comparison given the magnitude of the potential synergies and benefits,” according to the lawsuit. GM alleges that Marchionne was referring to his proposed merger with GM.
The case is General Motors LLC v FCA US LLC, 19-cv-13429, U.S. District Court, Eastern District of Michigan.