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GM Files Racketeering Suit Against FCA, Names Marchionne

CEO of FCA Sergio Marchionne at the FCA Fiat Chrysler Automobiles Industrial Plan 2019-2022 Press … [+] Conference on June 1, 2018 in Vercelli, Italy.

Pier Marco Tacca / 2016 Getty Images

General Motors Corp. said today it has filed a federal racketeering lawsuit against rival Fiat Chrysler Automobiles and former FCA executives who have already pled guilty in the ongoing federal corruption investigation. Also named in the suit is FCA’s late CEO Sergio Marchionne, claiming he orchestrated a multimillion-dollar conspiracy in part, as a means to force a merger with GM. Marchionne died unexpectedly July 25, 2018. 

Title page from federal racketeering lawsuit filed by General Motors Corp. against Fiat Chrysler … [+] Automobiles.

General Motors Corp.

“This lawsuit is intended to hold FCA accountable for the harm its actions have caused our company and to ensure a level playing field going forward,” said Craig Glidden, GM Executive Vice President and General Counsel in a statement.

The “harm” GM is claiming from what it termed “FCA’s manipulation of the collective bargaining process” during 2011 and 2015 contract negotiations “resulted in unfair labor costs and operational advantages,” the automaker’s statement said.

The lawsuit claims “more than $1.5 million in bribes were paid to UAW officials by FCA and that “These FCA Group bribes were authorized by its then CEO Sergio Marchionne (now deceased) to General Holiefield, the UAW Vice President and International Executive Board Member (now deceased) who oversaw the FCA business relationship.” 

The bribes, according to the lawsuit, were a key move by Marchionne to pressure GM into a tie-up with FCA, stating, “Through a self-described ‘rich’ FCA-UAW labor contract, (former UAW President Dennis) Williams and certain corrupt UAW leaders could seek to convince government investigators that they had obtained significant FCA concessions, while Marchionne could impose unanticipated costs on GM in order to force a merger. While GM ultimately resisted the takeover scheme, in the process Marchionne and FCA Group negotiated a 2015 CBA that, as designed, directly damaged GM as a result of the pattern of racketeering.”

Wednesday night, FCA updated its earlier statement quickly reiterating its dismay at GM’s actions, saying, “Fiat Chrysler Automobiles confirms that it will defend itself vigorously against the lawsuit filed yesterday by General Motors. FCA believes General Motors’ claims are nothing more than a meritless attempt to divert attention from that company’s own challenges. This astonishing ploy comes at a time when FCA is proving itself to be an ever more formidable competitor that continues to create significant value for all its stakeholders through the successful implementation of its long-term strategy. This includes the proposed merger with PSA, which itself completed the successful turnaround of the European businesses it acquired not long ago from General Motors. FCA will deal with this extraordinary attempt at distraction through the appropriate channels and will stay focused on continuing to deliver record results while realizing an exciting vision for the future of the industry. FCA is confident that it will prevail in defending itself against these claims in court and will also pursue all available remedies in response to this groundless lawsuit.”

GM’s lawsuit is just the latest shoe to drop related to an ongoing investigation by the U.S. Attorney’s Office in the Eastern District of Michigan that so far has resulted in charges against 13 FCA and UAW officials, and four former UAW and three FCA officials pleading guilty, including former FCA vice president and chief labor negotiator Alphons Iacobelli, who is now serving a five-and-a-half year sentence in federal prison. 

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Alphons Iacobelli, former vice president of union relations at Fiat Chrysler Automobiles NV, right, … [+] arrives with his wife Susanne Iacobelli at federal court in Detroit August27, 2018. Iacobelli admitted in a January 22 plea agreement that he delivered $1.5 million in prohibited payments to union leaders during his tenure as a labor negotiator for Fiat Chrysler Automobiles, from 2008-2015. The money was meant for the FCA-United Auto Workers National Training Center.

Jeff Kowalsky / 2018 Bloomberg Finance LP

While not named in GM’s lawsuit, the UAW weighed in with its own statement saying, ”The UAW 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 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. Those contracts, which were ultimately ratified by our membership, were negotiated with the involvement of both local and international representatives and the process had multiple layers of checks and balances to ensure their integrity.” 

GM is demanding damages “including but not limited to the billions of dollars in damages GM suffered as a result of Defendants’ bribery scheme,” along with punitive damages and costs. The company said it would invest an proce from the case “will be invested in the U.S. to benefit GM’s employees and grow jobs.”

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