GM sues Fiat Chrysler over union bribery scheme
General Motors has filed an unprecedented federal racketeering lawsuit against its crosstown Detroit rival, Fiat Chrysler.
At issue is a scheme by Fiat Chrysler executives to bribe United Auto Workers officials to get favorable treatment in labor contracts.
GM's lawsuit piggybacks on a federal investigation into UAW corruption that began several years ago - resulting in three Fiat Chrysler executives going to prison, along with six guilty pleas (so far) by union officials.
Federal authorities says the executives were involved in a bribery scheme meant to keep union officials "fat, dumb and happy," (quoting one of the convicted FCA executives, Alphons Iacobelli) during contract talks.
GM says normally, the union's pattern bargaining results in similar labor costs for all three Detroit automakers.
But the lawsuit says the bribes led to labor concessions for Fiat Chrysler - like the union agreeing to let the company use more lower paid workers - and billions of dollars in damages for General Motors.
Erik Gordon is with the University of Michigan Ross School of Business.
He says the misconduct has already been proved "but the hard part for GM is getting a jury to believe that misconduct also resulted in sweetheart deals for FCA."
The lawsuit also claims former Fiat Chrysler CEO Sergio Marchionne orchestrated the illegal activity to damage GM, after his bid for a merger with GM was rebuffed.
Marchionne died in 2018.
Fiat Chrysler in a statement denounced the lawsuit as meritless, and suggests the timing is meant to disrupt its proposed merger with Peugeot.
But Gordon thinks this lawsuit had to be in the works for quite some time.
"The proposed merger may have sped up the process of filing the lawsuit but it's unlikely that it triggered it," he says.
GM is not suing the UAW.
The timing of the lawsuit is problematic for the union nonetheless. It's currently in the middle of new contract negotiations with Fiat Chrysler.