GM files racketeering lawsuit
General Motors recently filed an unprecedented federal racketeering lawsuit against Fiat Chrysler
They are accusing their rival of bribing United Auto Workers officials to give the company an unfair cost advantage by corrupting the bargaining process, leading to billions in losses for GM. GM alleges a pattern of racketeering by FCA occurring from 2009 to 2015, with FCA utilizing lower-paid temporary workers. GM alleges that FCA, under the leadership of former CEO Marchionne, corrupted the bargaining process through bribing UAW officials. The lawsuit states that FCA would be liable to pay GM three times the damages, plus interest, punitive damages, and legal fees.
FCA representatives expressed astonishment at this filing as well as at its timing, as FCA is in the process of two critical negotiations: labor talks with Auto Workers union regarding a new contract and a tentative agreement to merge with French automaker, PSA group, the maker of Peugeot. FCA representatives view the lawsuit as an attempt to disrupt the potential 50-50 share merger, which is expected to create the fourth-largest automaker worldwide. While GM’s lawsuit is unprecedented, FCA’s response to the lawsuit is also significant, as it could be viewed as accusing GM of corporate sabotage.
Brand loyalty is key in the automotive industry, and the GM lawsuit could damage FCAs brand image as well as these critical business negotiations. FCA’s potential deal with PSA would likely help the company become competitive with other automakers globally and improve its electric car initiatives, an area in which GM has the advantage. Therefore, FCA has a lot on the line as the company faces this potentially damaging lawsuit.
This is a fascinating, somewhat unprecedented lawsuit for so many reasons. It will be great to watch this case unfold!
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