What Does GM Want From Fiat Chrysler?

Photo: AP

Last week, GM sued Fiat Chrysler, arguing that corrupt union bargaining had forced GM to pay its workers more than FCA does, and put it at a competitive disadvantage. The timing of the suit was a surprise, but GM said it was running up against a statute of limitations. Still, there was a sense about the whole ordeal that the timing was, in fact, pretty convenient.

You can read the whole suit here, but suffice it to say parts of it are spicy reading. Other parts of it we already knew. The first few grafs tell you where GM sees the lines drawn:

This lawsuit is categorically not against the nearly 50,000 hard-workingwomen and men employed by GM who are members of the International Union,United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”). The UAW and its officials are not Defendants to this lawsuit. This lawsuit does not seek to alter or reduce in any respect the wages and other benefits of any UAW worker in the past or into the future. In fact, this lawsuit is intended to build a stronger future for GM’s employees, the UAW, and the Company. That future depends on a collective bargaining process and labor relations grounded in integrity, good faith, and arm’s -length negotiations, which the law requires and this lawsuit isintended to vindicate.

2. This case is about an Italian company, Fiat Chrysler Automobiles N.V. (“FCA NV”), which managed to win the support of the U.S. government in obtaining operational control, for no cash, over an iconic U.S. auto company, Chrysler GroupLLC.

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The hint of both jingoism in that second graf and a subtle implication that Fiat’s take over of Chrysler wasn’t on the level (because of ... Italy’s history with organized crime? I guess?) is amusing, as is the idea, in the first graf, that GM and the UAW are best friends now, but the suit gets spicier when GM starts talking about late FCA CEO Sergio Marchionne.

In 2015, with cooperation of UAW leadership purchased through bribes, Marchionne schemed to use the collective bargaining process to harm GM by becoming the lead in negotiations and attempting to force a merger of the companies. For years, Marchionne had made clear to GM his desire to merge companies, voluntarily or through force. In the spring of 2015, Marchionne formally solicited GM for a merger and was rejected. In the ensuing months, with the purchased support of certain former UAW officials including then President Dennis Williams, Marchionne proceeded to orchestrate a negotiation of the 2015 CBA designed, through the power of pattern bargaining, to cost GM billions. These negotiations were conveniently timed, as Williams and Marchionne were aware the federal government was actively investigating past FCA-UAW agreements and potentially other misconduct. Through a self-described “rich” FCA-UAW labor contract, 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.

And with this we get to the real meat of the lawsuit, in which GM accuses a dead man of orchestrating a scheme to hurt GM all because GM wasn’t interested in his plan to merge with FCA, this suit being the culminating revenge now that GM has wrapped up a new contract for its own employees and FCA—negotiating their own contract with UAW while also merging with Groupe PSA—is in a fragile moment.

And, indeed, FCA was blindsided by the suit last week, rushing out statements to call it “meritless” and to say that they were “astonished” by the lawsuit, which, if nothing else, will cost them the price of long and complicated litigation and will keep some of its dirty laundry in the news for the foreseeable future.

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Yet, when the dust settled, legal experts said that civil racketeering suits like this one can usually only be taken up by the “primary victims,” which, in this case, probably isn’t GM.

Here’s The Wall Street Journal from yesterday:

[Jeffrey Grell, an attorney who teaches about the Racketeer Influenced and Corrupt Organizations Act, or RICO, at the University of Minnesota] said the people harmed most in the UAW-Fiat Chrysler corruption case are rank-and-file union members who ended up with weaker contracts because union leaders allegedly accepted bribes from the company. Even if GM can show that wrongdoing by Fiat Chrysler officials hurt its business, it will be difficult to prove that GM was the primary victim, he said.

“GM seems to be very far down that chain” of parties that claim harm by the alleged corruption, Mr. Grell said. “This case faces some unique challenges that make it even more difficult than a normal RICO claim,” he added.

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Separately, the WSJ reports, JPMorgan Chase said GM could seek “at least” $6 billion in claims arising from the case, which is about double what some estimate GM lost because of the strike, leading one analyst in the story to conclude that the suit was an attempt at making FCA pay for GM’s labor troubles. GM doth protest too much, in other words, as the Groupe PSA-FCA merger could make FCA stronger than ever and, of course, a bigger threat to GM than ever.

All of which tracks. And I’m no legal expert, but I did cover the courts for years as newspaper reporter, and I can say with some certainty that when a lawsuit like this opens with a sweeping introduction and language designed to move you rather than convince you, that’s a good sign that it isn’t fully convinced of itself.

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Take this sentence near the end of the introduction:

The damages that GM recovers will be used for investment in the United States to grow jobs and for the benefit of its employees.

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There’s again the implication, like in that graf above, that not supporting GM in this suit is not only wrong but also anti-American. Which could be effective if you merely want to tell a story, but isn’t much of a legal argument. But maybe that’s all GM wants to accomplish here, is to tell a story. It’s a story we already know a lot of the details of, but now GM will have its chance to explain just how much they were the victims of its own contract negotiations. The more I think about it, the weirder it sounds.

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About the author

Erik Shilling

News Editor at Jalopnik. 2008 Honda Fit Sport.