GM sues FCA, UAW under investigation: ‘The auto industry will likely never be the same’

DETROIT – Certainly the 2009 bankruptcies of General Motors and Chrysler were watershed moments in the auto industry’s history. We worked day and night for months to cover every twist and turn. Yet, these past two days covering the industry leave me almost as breathless with the unusual and unprecedented events of the past couple of days.

First and foremost, I am told it was at least half a century ago the United Auto Workers used its Article 30 process to throw out a union leader. Article 30 is a cumbersome, complicated, internal legal process meant to expel a union member from the union for misdeeds.

Wednesday the United Auto Workers International Executive Board held an emergency meeting. At the meeting members voted to start Article 30 proceedings against President Gary Jones and UAW Region 5 Director Vance Pearson. In a startling show of throwing a former beloved member under the bus, the UAW Executive Board published the internal charges against Jones on Thursday.

In nine pages, the union spelled out what read like a criminal indictment you’d see from the federal government. It said Jones ordered Vance Pearson and other associates to falsify expense reports for hundreds of thousands of dollars in lavish living expenses incurred during otherwise legitimate UAW Leadership Conferences at golf resorts in Palm Springs, California. Jones, who is an accountant, would allow massive expenditures, but would do a billing shuffle to make it look like the expenses were something different than what they were to the UAW accounting department. Worse yet, the union claims Jones invited his daughter to Palm Springs to use a vacated rented villa for a week and did not reimburse the union for the resort stay.

Jones had to know what was in the document because as soon as the Article 30 was announced Jones resigned as president and resigned from the union. Vance Pearson’s legal case reads very similarly to the UAW charges against Jones. Local 4 News reached out to his attorney in St. Louis to find out whether he would either resign or stand trial under Article 30. The attorney said no decisions have been made just yet. Meantime, Pearson is due in Federal Court in Detroit on Dec. 6 for what is expected to be a plea agreement.

Now, there is a reason the UAW’s new leadership has decided to do something totally out of character. The union likes to keep its business quiet and private and bends over backward to protect its membership. It’s because the federal government is obviously getting close to the big names in this corruption scheme and newly elected national president Rory Gamble doesn’t want the Feds to put his union into receivership. In order to keep control, Gamble is laying the union’s problems bare. Should you be interested in reading the Article 30 charges in full they are linked here.

The next spellbinding move we witnessed this week came from General Motors. It sued Fiat Chrysler Automobiles, claiming the late CEO Sergio Marchionne used bribes, kickbacks and otherwise underhanded methods to force it into a merger with FCA. Let’s face it, auto companies sue each other all the time but they don’t charge the other with racketeering. It’s a tough case to make. Still, former Prosecutor Keith Corbett of the Barrone Defense Team told Local 4 News on Thursday that it’s not like a government RICO case where it must be proved by above reasonable doubt. It’s only a preponderance of evidence, 50.1 percent to a jury that could net GM a win. The case rides on whether GM can prove the late Marchionne’s involvement. It can’t just be money and goods exchanged between rogue employees. Corbett says it will take years to get to that answer. Meantime, he says you can rest assured there are private investigators running around town working overtime to either make or defeat the case.

Fiat Chrysler put out a second statement today decrying GM’s audacious lawsuit saying:

“Fiat Chrysler Automobiles (“FCA” NYSE: FCAU /MTA: FCA) 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.

Why is this happening, you might wonder? Well, we asked AutoTrader analyst Michelle Krebs. She believes in the current automotive environment where the future is murky, where autonomous and electric vehicles require billions in investment on technologies that may or may not work out, survival is a major unknown. Predictions are we will see considerable consolidation is on the horizon. It’s what Marchionne himself predicted. She says the concern that it is causing is stripping away the usually congenial relationships between the automakers. They used to band together rallying to protect the industry. Krebs says GM’s suit strips all that away laying bare the brutally competitive atmosphere.

All this leaves me to ask is, which is it? Was Marchionne the avenging angel who salvaged thousands of jobs in saving Chrysler from bankruptcy? Or, was is he a scheming Machiavellian mastermind who flooded the UAW zone with cash to convince the UAW to help him force a GM merger with FCA? I put that question to Michelle Krebs and she believes it’s entirely possible he was both ... but it’s going to take years to sort out whether it really is the case.

There is an old Chinese curse: “May you live in interesting times.” They have found us and the auto industry will likely never be the same.

Read more

About the Author:

Rod Meloni is an Emmy Award-winning Business Editor on Local 4 News and a Certified Financial Planner™ Professional.