General Motors (NYSE:GM)
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By Nora Naughton
General Motors Co. filed a federal racketeering lawsuit Wednesday against Fiat Chrysler Automobiles NV, accusing it of corrupting union negotiations in an unusual legal dispute between crosstown rivals.
According to court documents filed in Michigan, GM's suit is related to the ongoing federal investigation into corruption between leaders at the United Auto Workers and Fiat Chrysler's labor-relations executives. GM accuses Fiat of corrupting the collective bargaining process in 2011 and 2015, as well as implementation of a 2009 agreement, to solidify a labor cost advantage for the Italian-American auto maker in its contracts.
Fiat Chrysler said it plans to defend against what it calls a "meritless lawsuit."
"We are astonished by this filing, both its content and its timing," the company said Wednesday. "We can only assume this was intended to disrupt our proposed merger with PSA as well as our negotiations with the UAW."
Fiat Chrysler recently revealed a proposed merger with Peugeot maker PSA Group of France.
GM will ask for "significant damages" from Fiat Chrysler after the discovery phase of the lawsuit is complete, GM chief legal counsel Craig Glidden said Wednesday.
Detroit-based GM, in the lawsuit, alleges that Fiat Chrysler orchestrated the alleged corruption through then-Chief Executive Sergio Marchionne, who died last year. Fiat Chrysler currently has an $8 hourly labor cost advantage over GM, largely because a bigger portion of its workforce isn't at the top wage scale.
The Justice Department's yearslong probe first became public in July 2017 and initially focused on a conspiracy by Fiat Chrysler executives to keep UAW officials "fat, dumb and happy," as prosecutors have said.
The three executives named in GM's lawsuit, including the former top labor-relations executive at Fiat Chrysler, have all pleaded guilty to charges related to the federal investigation. Fiat Chrysler has said the misconduct was perpetrated by a small group of individuals acting in their own interest.
The federal corruption probe has since widened, ensnaring several current and former UAW officials and implicating UAW President Gary Jones, who is currently on a leave of absence.
The UAW said Wednesday that it has taken steps to prevent financial misconduct from occurring again. It also said it is confident that labor contracts negotiated over the last decade weren't compromised and that each pact was ratified by the membership.
Shares of Fiat Chrysler fell 3% in midday trading Wednesday, and GM"s stock dropped 2.4%.
(END) Dow Jones Newswires
November 20, 2019 13:50 ET (18:50 GMT)
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