GM suing Fiat-Chrysler for billions, accusing automaker of bribery in negotiations with UAW

DETROIT - General Motors has filed a lawsuit against Fiat Chrysler, alleging the automaker bribed the United Auto Workers Union in an attempt to gain an advantage during labor agreements.

In a Wednesday filing, a 95-page complaint states that FCA engaged in unfair business by paying millions in bribes to UAW officials. The filing states that GM is seeking billions of dollars from FCA and the UAW.

The lawsuit states that GM is not suing members of the UAW or its members that work for GM, instead "this case is about an Italian company, Fiat Chrysler Automobiles" and that FCA "betrayed our government's and the U.S. auto industry's trust" when it bribed senior officials with the union to "corrupt the collective bargaining process."

GM says that, while a full accounting of the damage is not known, it estimates that it has incurred massive monetary damage in the form of higher costs and alleges that the bribery scheme was authorized at the highest levels of FCA.

According to GM, that included the late CEO Sergio Marchionne, executive Alphons Iacobelli, and director of employee relations Michael Brown at the Italian-based company.

"Senior FCA Group executives 'knowingly and voluntarily joined a conspiracy in which Fiat Chrysler Automobiles US LLC and its executives agreed to pay and deliver, and willfully paid and delivered, more than $1.5 million in prohibited payments and things of value to officers and employees of the UAW.'"

Fiat Chrysler said they are "astonished by this filing."

"We can only assume this was intended to disrupt our proposed merger with PSA as well as our negotiations with the UAW. We intend to vigorously defend against this meritless lawsuit and pursue all legal remedies in response to it.”

In the suit, GM says Marchionne in 2015 bribed UAW leaders to become the lead in negotiations for the next CBA (Collective Bargaining Agreement). GM claims Marchionne wanted to merge FCA with GM for years and, in 2015, solicited a merger but it was rejected.

Then GM claims he "purchased support" from certain former UAW officials, including then-President Dennis Williams, to orchestrate a negotiation of the 2015 CBA, which cost General Motors billions of dollars.

FCA was not expected to by any analysts or industry experts to be the CBA target in 2015. The company was the smallest, had the lowest profit margins and the highest percentage of lower-paid entry-level workers.

A "transformational deal", according to Marchionne, was reached just two days later. And after some back-and-forth, it was eventually approved.

"No one outside of FCA Group and certain UAW leaders knew that the deal was a product of a long-running, insidious fraud," the lawsuit reads.

The pattern set in this agreement hit General Motors hard, as they had a high degree of more costly Tier One workers than FCA. With a threat of strike, GM had to largely concede to FCA's agreement to keep the peace.

GM cut about $400 million out and totaled a final cost of approximately $1.9 billion in incremental labor charges over four years. This loss was $1 billion more than the deal GM believed it had reached with the UAW before the UAW’s selection of FCA as the lead.

At that time, FCA and UAW agreements were being investigated by the federal government, which GM says was "conveniently timed". The company claims during that time, FCA and certain UAW leaders worked to convince federal investigators that they had obtained FCA concessions so Marchionne could impose unanticipated costs to GM, forcing the merger between the two companies.

The merger never happened but GM says the 2015 deal damaged the company. GM is now accusing FCA and executives of racketeering for the past decade, violating the Labor-Management Relations Act, wire fraud, and mail fraud. GM is seeking damages for the benefit of the company and its employees, according to the lawsuit.

In response to the lawsuit, the UAW said it "is focused on continuing to implement ethics reforms and greater financial controls to make sure the misconduct which has been uncovered will never happen again."

"Mr. Iacobelli (a listed defendant) worked for both FCA and General Motors, and he is currently in prison for his crimes, which include the misuse of Joint Program funds. As to the collective bargaining agreements negotiated with FCA while Iacobelli was an FCA manager, we are confident that the terms of those contracts were not affected by Iacobelli’s misconduct, nor that of any UAW officials involved in the misuse of Joint Program funds at FCA."

They further added "That said, the fact that these issues can cause doubt about the contracts is regrettable. The UAW leadership is absolutely committed to making whatever changes are necessary to ensure on our end that misconduct that has been uncovered will never happen again."

In addition to accusations of bribery, GM's filing also states FCA systemically overstated its month-end sales figures starting in 2011, ultimately using the fraud to claim a record-breaking 71-month streak in year-over-year improvements. FCA admitted to those charges in 2016 following an investigation that was launched by the Department of Justice. The automaker paid $40 million in a settlement fee.

The UAW is currently embroiled in an FBI-led corruption probe that involves several members of the union's leadership. It's previous president, Gary Jones, stepped down from his post weeks ago and Rory Gamble, who has led talks between the UAW and Ford took over as acting president. 

Under state law, the amount of damages that would be awarded in a case like this would be determined at trial. 

FOX 2 is working through the complaint and will have more details published shortly. Check back here for more information.