Rick Haglund: Bombshell GM-FCA lawsuit loops auto execs into UAW scandal

November 24, 2019 6:53 am

President Donald Trump meets with CEO of General Motors Mary Barra (L), CEO of Fiat Chrysler Automobiles Sergio Marchionne (R) and other auto industry leaders in the Roosevelt Room of the White House on January 24, 2017 in Washington, DC. | Shawn Thew-Pool/Getty Images

Any notion that greedy United Auto Workers (UAW) union officials are solely to blame for the union’s escalating bribery scandal has been destroyed in a stunning federal court lawsuit filed by General Motors (GM).

GM on Wednesday sued rival Fiat Chrysler Automobiles (FCA), alleging that FCA engaged in racketeering by paying millions of dollars in bribes to UAW leaders in order to negotiate labor contracts more favorable to FCA than to GM.

The ultimate goal of the scheme, according to the lawsuit, was to weaken GM and force it to merge with FCA. Former Fiat Chrysler CEO Sergio Marchionne, who died in 2018, had sought such a deal for years.

Marchionne is accused by GM of authorizing more than $1.5 million in bribes to UAW officials so that FCA could get cheaper labor contracts than GM in 2009, 2011 and 2015.

Earlier this year, the Ann Arbor-based Center for Automotive Research said FCA’s total labor costs, including wages and benefits were about $55 an hour, $8 an hour less than GM’s labor costs. FCA had a $6-an-hour advantage over Ford Motor Co.

That’s a huge advantage for FCA in the highly competitive, cost-driven global auto industry.

GM’s explosive lawsuit casts an enormous dark cloud over Michigan’s signature industry, with the potential to shred its image among consumers, regulatory agencies and investors. 

The allegations of widespread corruption in the executive suites of the automakers and the UAW are a major distraction for an industry engaged in an expensive, historic transition from gasoline-fueled cars and trucks to electric vehicles with the capability to drive themselves.

FCA called the lawsuit an “astonishing ploy” and said GM’s claims “are nothing more than a meritless attempt to divert attention from that company’s own challenges.”

The Italian-American automaker claimed GM’s suit is designed to interfere with its current UAW labor contraction talks and jeopardize its pending merger French automaker PSA Peugeot.

GM doesn’t exactly stand at arm’s length from the scandal. Former FCA labor relations chief Alphons Iacobelli, whom GM names as a plaintiff in the lawsuit, took a top labor relations job at GM after being fired by FCA in 2015.

He was later dismissed by GM and is serving a 5 ½-year prison sentence for his role in funneling $4.5 million in UAW training center funds to himself and UAW officials. Among the luxury items Iacobelli lavished on himself were a Ferrari and $38,000 in Monte Blanc pens.

And retired UAW Vice President Joe Ashton, who had served as the UAW’s representative on GM’s board of directors, is expected to plead guilty next month on charges that he demanded $550,000 in bribes and kickbacks from UAW vendors.

No Ford officials have been implicated in the widespread corruption. But the automaker might not be in the clear just yet. 

Detroit News investigative reporter Robert Snell, who has lead coverage of scandal, reported in October that federal law enforcement officials are investigating whether the Detroit Three automakers indirectly paid as much as $1 million for a cabin and other amenities at the UAW’s Black Lake retreat.

The cabin was built for retired UAW President Dennis Williams, who also is under federal investigation in connection with misuse of member dues. The UAW said it is selling the cabin.

Whether GM will prevail in its claims is unknown, of course. GM hasn’t specified how much it’s seeking in damages, but analysts have estimated it could ultimately be as much as $15 billion.

What is known is that Marchionne lusted for GM. He made several merger proposals to the company, including a creepy advance toward GM CEO Mary Barra in 2015.

“It would be unconscionable not to force a partner,” Marchionne said, adding that he wasn’t “trying to date Mary” — he just wanted to see her.

“Everything starts with physical contact,” he said about corporate mergers. “Then it can degrade, but it starts with physical contact.”

Marchionne also attracted the attention of the feds concerning a $2,400 watch he gave to late UAW Vice President General Holiefield in 2010. Marchionne attached a note saying he valued the watch at under $50 to avoid a conflict-of-interest problem, according to the Detroit News.

Gary Jones | UAW photo

There is no question the UAW needs a complete house cleaning in order to remain a viable labor organization. The federal probe into union corruption has so far resulted in 13 indictments and 10 convictions.

UAW President Gary Jones resigned from the union on the same day GM sued FCA, hours after the union took steps to boot him out. Much more needs to be done.

Retired UAW public relations chiefs Rev. Peter Laarman and Frank Joyce have called on the union’s entire executive board and senior staff to resign.

“What stands revealed is that today’s UAW has completely lost its way in respect to mission and purpose,” they recently wrote.

But bribery takes someone to pay the bribe. It’s unconscionable that top auto executives appear to have been full partners in this ugly corruption.

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Rick Haglund
Rick Haglund

Rick Haglund writes the "Micheconomy" column for the Michigan Advance. He's a former reporter and business columnist for Booth Newspapers, now the MLive Media Group, with extensive experience covering Michigan’s economy and the auto industry. He now works as a freelance writer based in Southeast Michigan.