GM sues Fiat Chrysler over union bribes

General Motors is suing Fiat Chrysler (FCA), alleging that its crosstown rival got an unfair business advantage by bribing officials of the United Auto Workers union.

The lawsuit, filed Wednesday in U.S. District Court in Detroit, alleges that FCA was involved in racketeering by paying millions in bribes to get concessions and gain advantages in three labour agreements with the union.

Details of the racketeering have been exposed in a federal probe of corruption at the union that has resulted in multiple arrests.

The lawsuit alleges that Fiat Chrysler corrupted the bargaining process with the UAW in the 2009, 2011 and 2015 union contracts to gain advantages over General Motors.

Craig Glidden, GM's chief counsel, alleged that Fiat Chrysler CEO Sergio Marchionne, who died last year, was a "central figure" in the conspiracy, which was designed to put GM at a cost disadvantage to FCA.

"FCA was the clear sponsor of pervasive wrongdoing, paying millions of dollars in bribes to obtain concessions" from the union, Glidden said. "FCA's manipulation of the collective bargaining process resulted in unfair labour costs and operational advantages for it, causing harm to GM."

A message was left Wednesday seeking comment from Fiat Chrysler.

In addition to Fiat Chrysler, the lawsuit names former FCA labour relations chief Alphons Iacobelli, and former FCA officials Jerome Durden and Michael Brown as defendants. All have pleaded guilty in the federal corruption probe, which has alleged that Fiat Chrysler bribed UAW officials to keep them "fat, dumb and happy."

Authorities have alleged that payments were made through a training centre jointly run by the company and the UAW. Durden handled the training centre's finances, and Brown helped run the centre.

Advantages gained

Glidden told reporters that in the three UAW contracts, FCA was able to reduce its labour costs because the union allowed it to hire more temporary and lower-paid workers than GM.

"Many of the advantages FCA was able to obtain were denied to GM. That was part of the conspiracy," Glidden said.

In 2007, the union agreed that new hires would be paid less than longtime workers, setting up a "second-tier" of employees who were paid less. FCA had more second-tier workers than either of its Detroit competitors.

Glidden said GM is not suing the UAW because it believes that responsibility rests with FCA, which was the "orchestrator" of the conspiracy. He accused FCA of mismanagement of "stunning proportions" and should be held accountable.

"GM was chosen as a target by FCA, so that's why we're suing FCA," he said. "We were denied benefits that FCA received under their collective bargaining agreements and were damaged as a result.

Glidden said GM is seeking substantial damages in the case, but he could not give a specific amount.

Last week, a retired union vice-president and former GM board member became the 13th person to be charged in the federal probe of the union and auto companies.

Joe Ashton is accused of receiving millions of dollars in kickbacks from a contractor who made watches for union members. The 58,000 watches, purchased through the GM-UAW joint training centre, are still in storage five years later.

Ashton, a former GM board member, was charged with conspiracy to commit wire fraud and conspiring to commit money laundering. A guilty plea is expected on Dec. 4, according to a court filing Wednesday.

Glidden said GM had no knowledge of the scheme that allegedly involved Ashton, and the lawsuit had nothing to do with that case.

"In the fullness of time, GM will address that conduct," he said.