This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.nytimes.com/2019/11/20/business/gm-fiat-chrysler-lawsuit.html

The article has changed 8 times. There is an RSS feed of changes available.

Version 4 Version 5
G.M. Racketeering Lawsuit Accuses Fiat Chrysler of Bribery and Corruption G.M. Sues Rival Over Bribery Scheme as Union Scandal Expands
(about 1 hour later)
General Motors on Wednesday accused its rival Fiat Chrysler in a federal lawsuit of manipulating contract negotiations with the autoworkers union to hurt G.M. General Motors on Wednesday accused its rival Fiat Chrysler of bribing United Auto Workers officials to gain competitive advantages in contract negotiations.
In a complaint filed with the United States District Court in Detroit, G.M. claimed that Fiat Chrysler bribed United Auto Workers officials to gain competitive advantages in contract negotiations conducted in 2011 and 2015. Hours after G.M. leveled that accusation, in a federal lawsuit, the union’s president was reported to have resigned as the U.A.W. took steps to oust him.
Three former Fiat Chrysler officials have previously pleaded guilty to a number of charges related to their use of money that had been set aside for a training center that the company ran with the union. Several U.A.W. officials have also pleaded guilty to various charges. The day’s events stem from long-running Justice Department investigations into financial wrongdoing at the union that has now embroiled two of the world’s largest automakers in one of the most acrimonious legal battles in industry history.
G.M.’s lawsuit asserts that the effort to manipulate union talks was authorized by Fiat Chrysler’s chief executive at the time, Sergio Marchionne, who died in 2018, and was carried out by its former head of labor relations, Alphons Iacobelli, who pleaded guilty and is now serving a five-and-a-half year sentence in prison. The suit also contends that executives used bribes to secure union support for Fiat Chrysler’s highly public effort to pressure G.M. into a merger in 2015. Federal prosecutors have already secured guilty pleas from three former Fiat Chrysler executives and several U.A.W. officers. Those cases have revealed a cozy back-scratching culture in which corporate and union leaders siphoned off millions of dollars — some of which was dedicated for a training center — to pay for Rolex watches and lavish personal travel and meals.
“The lawsuit exposes a multiyear pattern of wrongdoing by former F.C.A. executives revealed through the continuing criminal investigation by the U.S.,” G.M. said in a statement. The company did not sue the union, which recently reached a new agreement with G.M. after a 40-day strike and is in the middle of negotiating a new contract with Fiat Chrysler. In its lawsuit, G.M. asserts that the corruption went far beyond garden-variety embezzlement and personal enrichment. The company argues that the illegal activity was authorized by Fiat Chrysler’s chief executive at the time, Sergio Marchionne, and helped Fiat Chrysler win union acceptance of cost concessions that were denied to G.M. in labor contracts in 2011 and 2015. The suit also contends that executives used bribes to secure union support for Fiat Chrysler’s highly public effort to pressure G.M. into a merger in 2015.
The suit is hardly the first epic legal battle in the auto industry, or even the first one between G.M. and Fiat. In the 1990s, G.M. tangled with Volkswagen after that company hired a key G.M. executive, who took confidential cost-cutting data with him. In 2003, Fiat and G.M. were partners and Fiat had the right to force G.M. to acquire Fiat. After a bitter legal battle, Mr. Marchionne, who died in 2018, forced G.M. to pay $2 billion to end the partnership.
Mr. Marchionne later engineered Fiat’s merger with Chrysler and in 2015 publicly announced he wanted Fiat Chrysler to merge with G.M., an offer G.M. rebuffed.
G.M. said on Wednesday that it would seek billions of dollars in damages, without giving a specific amount. The suit names Fiat Chrysler and the three convicted former executives as defendants, but no current Fiat executives.
“F.C.A. was able to obtain unique advantages, different and distinct, and in fact denied to G.M.,” said Craig Glidden, G.M.’s general counsel, said during a conference call with reporters.
In a statement, Fiat Chrysler said it was “astonished” by the lawsuit. “We can only assume this was intended to disrupt our proposed merger with PSA as well as our negotiations with the U.A.W.,” the company said, referring to its deal with the maker of Peugeot and Citroën cars. “We intend to vigorously defend against this meritless lawsuit and pursue all legal remedies in response to it.”In a statement, Fiat Chrysler said it was “astonished” by the lawsuit. “We can only assume this was intended to disrupt our proposed merger with PSA as well as our negotiations with the U.A.W.,” the company said, referring to its deal with the maker of Peugeot and Citroën cars. “We intend to vigorously defend against this meritless lawsuit and pursue all legal remedies in response to it.”
G.M.’s suit asserts that the effort to manipulate union talks was carried out by Fiat Chrysler’s former head of labor relations, Alphons Iacobelli, who pleaded guilty and is now serving a five-and-a-half year sentence in prison.
Erik Gordon, a business professor at the University of Michigan who follows the auto industry, said the lawsuit was a serious matter for Fiat Chrysler. “This is not just G.M. trying to throw a log into the works of a competitor,” he said.
Professor Gordon added that it might not be easy for G.M. to prove its allegations in court. “They have to show G.M. got a different deal with the union because of the illegal payments that were going on with Fiat Chrysler,” he said. “It could be tough to get a jury to connect those dots.”
Barring a settlement, the lawsuit could take years to resolve and could reveal details about the inner workings of both companies.
G.M. did not sue the union, which recently reached a new agreement with G.M. after a 40-day strike and is in the middle of negotiating a new contract with Fiat Chrysler.
In the suit, G.M. claimed Fiat Chrysler gained competitive advantages through the union’s agreement to support its long-term business plan and a major overhaul of its manufacturing system. The lawsuit also says that the union agreements allowed Fiat Chrysler to hire more temporary workers at entry-level wages than G.M.In the suit, G.M. claimed Fiat Chrysler gained competitive advantages through the union’s agreement to support its long-term business plan and a major overhaul of its manufacturing system. The lawsuit also says that the union agreements allowed Fiat Chrysler to hire more temporary workers at entry-level wages than G.M.
G.M. said it was seeking billions of dollars in damages but did not specify an amount. The company said it would reinvest the money into its operations in the United States.G.M. said it was seeking billions of dollars in damages but did not specify an amount. The company said it would reinvest the money into its operations in the United States.
The autoworkers union said in a statement that it was “confident” that the terms of its contracts with Fiat Chrysler were not affected by “Iacobelli’s misconduct nor that of any U.A.W. officials involved in the misuse of Joint Program funds at F.C.A.”The autoworkers union said in a statement that it was “confident” that the terms of its contracts with Fiat Chrysler were not affected by “Iacobelli’s misconduct nor that of any U.A.W. officials involved in the misuse of Joint Program funds at F.C.A.”
“Those contracts, which were ultimately ratified by our membership, were negotiated with the involvement of both local and international representatives and the process had multiple layers of checks and balances to ensure their integrity,” the U.A.W. said. Just a few hours after that statement, the union issued a second statement saying that its board was seeking to remove its president, Gary Jones, and another official, Vance Pearson, for the “submission of false, misleading and inaccurate expense records.” After that, a lawyer for Mr. Jones told The Detroit News that he was resigning.
Separately, the union said on Wednesday that its board was seeking to remove its president, Gary Jones, and another official, Vance Pearson, for the “submission of false, misleading and inaccurate expense records.” Mr. Jones went on a leave of absence this month after the Federal Bureau of Investigation raided his home in August. Mr. Jones went on a leave of absence this month after the Federal Bureau of Investigation raided his home in August.
G.M. has battled Fiat and Mr. Marchionne in court before. Shares of G.M. fell about 3 percent on Wednesday, and Fiat Chrysler stock ended 3.7 percent lower.
The two companies were partners in the early 2000s, when Mr. Marchionne was Fiat’s chief executive. Fiat had the right to force G.M. to acquire Fiat through what is known as a put option. Mr. Marchionne sought to force G.M. to pay Fiat not to exercise the option, which G.M. contested in court. In the end, G.M. paid Fiat $2 billion to settle the matter.
Shares of G.M. and Fiat Chrysler were down about 3 percent and 4 percent at 3:30 p.m. on Wednesday.
This is a developing story and will be updated.