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| G.M. Sues Rival Over Bribery Scheme as Union Scandal Expands | G.M. Sues Rival Over Bribery Scheme as Union Scandal Expands |
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| General Motors sued its rival Fiat Chrysler on Wednesday, asserting that it bribed United Auto Workers officials in contract negotiations in order to get a leg up on G.M. over the course of a decade. | |
| Hours after G.M. filed the lawsuit, in federal court, the union’s president resigned as the U.A.W. took steps to oust him. | |
| The day’s events embroiled two out of the country’s three biggest automakers and the union that represents their workers, a controversy the likes of which the industry has rarely experienced. The lawsuit and the turmoil at the top of the union stem from long-running Justice Department investigations into financial wrongdoing at the union and Fiat Chrysler. | |
| 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. | 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. |
| 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. | 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. | 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. | 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. | 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. | “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. | 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. | 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.” | 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.” |
| One potential problem for G.M.’s case: It has done well over the last 10 years, often reporting higher profit margins than Fiat Chrysler in North America, where the companies are direct competitors. In several recent quarters, however, Fiat Chrysler has reported North American profit margins of more than 10 percent, about the same as G.M. | |
| Barring a settlement, the lawsuit could take years to resolve and could reveal details about the inner workings of both companies. | 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. Mr. Glidden said the lawsuit was not intended to disrupt Fiat Chrysler’s bargaining position or its potential merger with PSA. | |
| 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.” |
| 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.” A lawyer for Mr. Jones, J. Bruce Maffeo, said in a statement that Mr. Jones had decided to resign as president and retire from the union before he learned that the U.A.W. board was seeking his ouster. | |
| Mr. Jones has not been charged but has come under scrutiny as federal prosecutors have found union officials from a regional office he previously headed charged more than a million dollars in luxury travel and personal spending to the union. Mr. Jones went on a leave of absence this month after the Federal Bureau of Investigation raided his home in August. The Justice Department charged Mr. Pearson with conspiring to embezzle U.A.W. funds. | |
| Shares of G.M. fell about 3 percent on Wednesday, and Fiat Chrysler stock ended 3.7 percent lower. | Shares of G.M. fell about 3 percent on Wednesday, and Fiat Chrysler stock ended 3.7 percent lower. |