GM lawsuit could mean major liabilities for FCA

November 29, 2019 10:00 PM |updated 3 hours ago

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Sergio uaw hug

FCA CEO Sergio Marchionne was pictured here hugging former UAW President Dennis Williams in 2015.

DETROIT — Beyond seeking billions of dollars in damages, General Motors’ unprecedented racketeering lawsuit against Fiat Chrysler Automobiles aims to clean up the entire union-management negotiating process for the auto industry and, in reality, all of corporate America.

“This lawsuit seeks a level and honest playing field for all stakeholders in the U.S. auto industry, including manufacturers, suppliers, the UAW and employees critical to making this industry a worldwide success,” the Nov. 20 lawsuit says.

But in the process, GM promises to drag FCA and the UAW through more than a decade’s worth of corruption and conspiracies linked directly to the late FCA CEO Sergio Marchionne and former UAW President Dennis Williams.

This case creates massive potential liabilities for FCA, and perhaps the UAW, if it gets momentum in court. It also could yield reputational and additional legal liabilities for everyone involved. Damages awarded in civil rackeetering cases are multiplied by three.

In the 95 pages of GM v. FCA, the vast majority of evidence is public record from company disclosures, plea agreements, indictments and verifiable sources. These are basically indisputable pieces of evidence regardless of the fact that Marchionne is deceased, as is one of the ringleaders on the UAW side of the scandal, General Holiefield.

The complaint devotes several pages to documenting and quantifying specific ways FCA won secret labor concessions that GM says it was refused.

FCA allegations

One of the potentially lethal maneuvers in the case cites a section of the U.S. racketeering act known in legalese as a 1962(b) violation. In this charge, GM alleges that FCA in effect bought the UAW’s top leadership in a bid to get the union to lower FCA’s labor costs and raise GM’s — with the motive of coercing GM into a merger long coveted by March-ionne.

The UAW’s support of such a merger was purchased by FCA, the lawsuit contends.

But GM rejected it. One GM executive quipped: “Why should GM bail out FCA?”

So four years later, GM’s lawyers now think they can prove FCA bought the UAW.

FCA called the suit “meritless.” It promised a rigorous defense but declined to answer further questions about the case.

UAW ScandalUAW scandal timeline and key figures: In charges filed since July 2017, federal prosecutors have revealed that millions of dollars intended to train workers was instead spent by some UAW leaders on assorted luxuries. The charges have exposed fraud within the massive U.S. auto manufacturing union. Will this scandal spread? Here is a timeline and our list of key players.

Given the depth of GM’s claims, and the threat of huge reputational hits from media coverage of this case, FCA also signaled it will launch a major legal counterattack — particularly with a potential merger with France’s PSA Group hanging in the balanceIt doesn’t help FCA’s defense that GM employed one of FCA’s crooked executives, Alphons Iacobelli, for 17 months after he committed his crimes at FCA.

To be sure, FCA can counter GM’s argument by claiming its competitor simply did a poor job negotiating with the UAW. FCA has cried foul about the suit, claiming GM is merely trying to disrupt FCA’s labor talks and merger negotiations.

UAW liabilities

On the first page of the suit, GM goes out of its way to say it isn’t suing its workers or the UAW.

“In fact, this lawsuit is intended to build a stronger future for GM’s employees, the UAW and the Company,” the suit says. “That future depends on a collective bargaining process and labor relations grounded in integrity, good faith and arm’s-length negotiations, which the law requires and this lawsuit is intended to vindicate.”

Despite this altruistic introduction, the case goes for the UAW’s jugular during the years it was led by Williams, including the 2015 contract negotiations.

A UAW spokesman declined to say if the union plans to intervene in the case.

A previous statement asserted that its FCA contracts “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.

“That said, the fact that these issues can cause doubt about the contracts is regrettable.”

What about Ford?

Ford Motor Co. has yet to take a position on the GM suit and has no immediate plans to join the case. But if Ford followed GM’s logic, in theory it also could claim significant competitive disadvantes caused by the bribery scandal.

Automotive News asked Ford CEO Jim Hackett whether he had talked with his legal team about joining GM’s case.

“No. We’re not having any discussions like that,” Hackett said in an interview last week. “And you know, candidly, for me, I’ve got so many important things on my plate about the transformation of the company, I want to stay zeroed in on that. I get to say I wasn’t here when all that went down, so it kind of absolves me from all the interest in it.”

Scandal looms

Meanwhile, the ongoing UAW corruption scandal continues to metastasize, and more charges are expected. In all, 13 UAW and FCA officials have faced charges in the yearslong federal probe; 10 have pleaded guilty.

UAW President Gary Jones, who hasn’t been charged with a crime, resigned Nov. 20.

The specter of a federal takeover of the union looms. It’s unclear whether GM’s case could influence how the U.S. Labor and Justice departments would proceed with such a case, which would use the same racketeering statute that put the Teamsters under federal supervision in 1989 until 2015.

How or when GM’s lawsuit gets resolved is anyone’s guess. Litigation like this can bounce around federal courts for years.

Should the case survive initial challenges, FCA and its presumptive merger partner, PSA, will have to decide if they want such a radioactive piece of litigation on their plates for the long haul.

The auto industry can only hope integrity can one day return to labor relations.

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