By Nora Naughton and Christina Rogers
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 21, 2019).
General Motors Co. accused Fiat Chrysler Automobiles NV of
bribing union negotiators to gain a competitive advantage,
triggering an unusual legal dispute between crosstown rivals by
filing a federal racketeering lawsuit.
Separately, the head of the United Auto Workers union resigned
Wednesday after the UAW's board publicly accused him of submitting
false and misleading expense reports and concealing the misconduct.
Gary Jones earlier this month took a leave of absence as UAW
president amid a federal investigation into union corruption.
The GM lawsuit relates to a federal investigation into
corruption between leaders at the UAW and labor-relations
executives at Fiat Chrysler. In its suit filed in Michigan, GM
accuses its rival 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 Fiat Chrysler.
The Detroit auto maker alleges Fiat Chrysler executives obtained
advantageous contract terms from the UAW by paying off union
leaders, a corruption scheme that federal prosecutors have been
investigating for several years and that led to guilty pleas by
three Fiat Chrysler employees. GM said the bribes were authorized
by then-Chief Executive Sergio Marchionne, who died last year.
Fiat Chrysler said it would defend itself against what it called
a "meritless lawsuit" and accused GM of trying to interfere with
ongoing UAW negotiations and the Italian-American auto maker's
proposed merger with France's PSA Group.
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. He said there are no plans to
target the UAW as part of the lawsuit.
Industry analysts say they can't recall the last time one
Detroit car company sued another, especially over dealings with the
UAW.
"This is really unprecedented," Kristin Dziczek, an economist
and labor expert at the Center for Automotive Research in Ann
Arbor, Mich., said of GM's legal attack.
While historically the three major U.S. car companies have
avoided such legal tussles, the competitive landscape has become
more unpredictable lately with global auto sales slowing and
car-sector profits under pressure, said Jeff Schuster, president of
global forecasting at LMC Automotive.
'You're going to look after your interests first," Mr. Schuster
said. "GM wants to protect their business and reputation."
The lawsuit lands at a sensitive time for Fiat Chrysler, which
is negotiating a new four-year labor agreement for roughly 47,000
blue-collar workers at its U.S. factories and exploring a tie-up
with PSA that if completed would create one of the world's largest
auto makers. The French group's brands include Peugeot, Citroën and
Opel.
Fiat Chrysler is trying to navigate the fallout of the criminal
probe into its dealings with the UAW and restore confidence among
rank-and-file members, who have the final say over any labor
agreement reached during the current contract negotiations.
"This puts a lot more pressure on bargaining at FCA, which was
already going to be challenging," Ms. Dziczek said.
Fiat Chrysler, the smallest of the Detroit car companies, has
long benefited from comparatively low labor costs, The advantage
over its rivals stems in part from its having a higher percentage
of temporary workers and more union-represented factory employees
earning less in pay because they were hired more recently.
Fiat Chrysler currently has an $8 hourly labor cost advantage
over GM.
GM, in its lawsuit, alleges that Fiat Chrysler orchestrated the
alleged corruption through Mr. Marchionne. The suit lays out
efforts by Fiat Chrysler to forge an alliance with the UAW that
would provide special benefits to the auto maker, going back to
when Mr. Marchionne first sought to acquire bankrupt Chrysler Group
LLC in 2009.
The UAW said Wednesday it has taken steps to prevent misconduct
by its officials from occurring again. The union added it is
confident labor contracts negotiated over the last decade weren't
compromised and emphasized that each one was ratified by the
membership.
The UAW secured a new labor agreement with GM last month after a
40-day strike that crippled the company's U.S. factories and sent
tens of thousands of workers to the picket lines. The union also
recently finalized a deal with Ford Motor Co. and has turned its
full attention to contract talks at Fiat Chrysler. Ford declined to
comment on GM's lawsuit.
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 employees 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, including Mr. Jones. His
home in Michigan was searched by federal agents in August. Mr.
Jones, who became UAW president in June 2018, has not been
charged.
Former UAW Vice President Joe Ashton, who also previously served
on GM's board of directors, was charged earlier this month with
fraud and money laundering. GM said it wasn't aware of any
wrongdoing by Mr. Ashton. His attorney, Jerome A. Ballarotto,
hasn't previously returned requests for comments.
Bruce Maffeo, Mr. Jones's attorney, said his client made the
decision to resign as UAW president and retire from the union
before learning of the board's decision to force his removal.
Rory Gamble, the UAW's top bargainer with GM and now acting
president, said Wednesday that the union remains committed to
implementing new ethics reforms and financial controls.
Write to Christina Rogers at christina.rogers@wsj.com
(END) Dow Jones Newswires
November 21, 2019 02:47 ET (07:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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