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Howes: GM, FCA lawsuit promises unprecented fight between auto industry titans

Daniel Howes
Detroit News

The federal crackdown on union corruption has claimed more than 10 convictions so far. And it’s resulted in the resignation of United Auto Workers President Gary Jones.

It also produced a stunner: General Motors is using a racketeering lawsuit … the stuff of mafia fighters … to charge rival Fiat Chrysler with scheming to weaken GM over the past decade. And they’re using evidence in the UAW corruption case to do it.

Here’s the background: GM says the federal investigation shows that Fiat Chrysler bribed union officials to inflate GM’s costs and undermine its competitive position in the decade since its bankruptcy.

GM says the mastermind is FCA’s late legendary CEO, Sergio Marchionne. The company’s brass learned about the allegation from a news headline while they were in a board meeting in London. Zero notice, complete surprise … amid FCA’s contract talks with the UAW and continuing merger discussions with Groupe PSA, maker of France’s Peugeot cars.

The charges were delivered the same day Gary Jones quit as union president. The whole thing promises an ugly, long-running public confrontation like this town has rarely seen.

Here are two historic Detroit automakers, their rescues financed by American taxpayers a decade ago, sparring publicly over allegations of bribery … violations of labor law … and a campaign to force GM into a merger with FCA that it would control.

Voila! The Marchionne who died two summers ago would finally get the global colossus he craved. He’d run it. And in what was code-named “Operation Cylinder” he’d get it with the support of UAW President Dennis Williams. Williams has since been implicated in the corruption probe for embezzlement and misuse of union funds.

Didn’t matter that illegal payments to union officials began just weeks after the new Fiat-Chrysler emerged from bankruptcy, GM and court papers say, thanks to billions from American taxpayers.

Didn’t matter to Marchionne that GM said no thanks to a deal in 2012 … said no at least twice in 2015. Didn’t matter that GM was looking to reduce its exposure in unprofitable regions, not expand it.

GM says FCA under Marchionne was a “clear sponsor of pervasive wrongdoing, paying millions of dollars in bribes.” This should be good – the march to a jury trial, complete with discovery and depositions of ranking execs.

The lawsuit promises an unprecedented public fight between two titans of the U.S. auto industry – two companies that wouldn’t be here without rescues by American taxpayers.

That’s what makes this fight so unseemly. The Obama administration engineered the bankruptcies of GM and FCA to position them for the future, to save jobs … rescue communities. The feds certainly didn’t agree to let a foreign company emerge with control of Detroit’s number three automaker, get American cash and then distribute it to corrupt union officials, as GM alleges.

If Marchionne’s scheme withstands scrutiny in federal court, it’ll go down as one of the longer long games in automotive history – a grandiose plan to create a global powerhouse by eliminating one Detroit automaker and who knows how many jobs.

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Daniel Howes is columnist and associate business editor of The Detroit News. A former European correspondent for The News, he has reported from nearly 25 countries on three continents and in the Middle East. Before heading to Europe in 1999, Howes was senior automotive writer and a business projects writer. He is a frequent contributor to NewsTalk 760-WJR in Detroit and a weekly contributor to Michigan Radio in Ann Arbor.
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