FCA's legal troubles mount with exec's whistleblower lawsuit
A whistleblower lawsuit filed against Fiat Chrysler Automobiles NV by one of its top executives is the latest legal headache for the Italian-American automaker — and may complicate any future efforts to find a partner.
The lawsuit is just the latest turmoil for Fiat Chrysler, an automaker already embroiled in a federal criminal probe by the U.S. Attorney's office in Detroit. Authorities are investigating corruption within the U.S. auto industry and have secured eight convictions, including former Fiat Chrysler Vice President Alphons Iacobelli, once the automaker's top labor-relations executive.
Just hours after The Detroit News reported the lawsuit filed by FCA's U.S. sales chief Reid Bigland, Fiat Chrysler abruptly withdrew its 50-50 merger proposal to French automaker Renault SA. Experts say one result is that the Italian-American automaker, which appears increasingly hungry for a partnership, could be less approachable for would-be partners.
"You want to negotiate with a partner that has as few issues as possible, and that demonstrates integrity," said Michelle Krebs, an industry analyst for Cox Automotive. "Any legal blemishes are cause for concern and may prompt a potential partner to back off."
Bigland, FCA's U.S. sales chief and head of the lucrative Ram brand, filed the federal whistleblower lawsuit against his employer Wednesday, claiming the automaker is using him as a scapegoat for inflated vehicle sales practices currently under investigation by the Securities and Exchange Commission. He's alleging FCA retaliated against him for cooperating with the investigation by cutting his pay by more than 90%.
Fiat Chrysler is also at the center of an ongoing criminal federal investigation into a wide-ranging labor conspiracy that has focused heavily on the Italian-American automaker and United Auto Workers leaders. Meantime, federal investigators in July 2016 began probing FCA's U.S. sales reporting process after two Illinois dealers filed a civil racketeering lawsuit against the automaker that alleged the company was paying dealers to fudge their numbers.
The longtime FCA executive is a key player on new CEO Mike Manley's executive team. Bigland succeeded Manley as head of the Ram brand as part of the new chief executive's reorganization of leadership in October. Bigland came to FCA in 2006 to run the automaker’s Canadian operations, a job he still holds. In his 13-year career with the Italian-American automaker, Bigland has also led the Dodge brand, Alfa Romeo and Maserati.
Intensifying legal troubles and uncertainty among the top ranks aren't necessarily good looks for a company that's hoping to forge a partnership, analysts say, and those problems are compounded by the fact FCA has watered down its appeal to potential partners by pursuing so many companies.
Fiat Chrysler's withdrawn merger with Renault is just the latest in a long line of courtships, dating almost five years to late CEO Sergio Marchionne's pursuit of an uninterested General Motors Co. Since then, FCA has also tried to charm Volkswagen AG and, more recently, Groupe PSA SA of France.
"FCA has not shown themselves to be a desirable merger partner," said Erik Gordon, a professor at the University of Michigan's Ross School of Business. "They seem willing to talk to anyone, and they're starting to look like the ninth grade boy who's asking every girl to the dance and getting turned down in the hallway."
In the case of Renault, it likely wasn't FCA's legal troubles that brought negotiations to a halt. In a statement released early Thursday out of Europe, FCA said the "political conditions in France" were not conducive to a healthy merger.
Fiat Chrysler says it can continue operations as an independent company, but the automaker still lags on electrification and its businesses in Europe and China continue to struggle. And Chairman John Elkann said in a memo to employees, obtained by The Detroit News, that FCA "will continue to be open to opportunities of all kinds that offer the possibility to enhance and accelerate the delivery of that strategy and the creation of value"
"FCA needs to do something," Gordon said. "It's possible they dodged a bullet with Renault and the French government, but I wouldn't be surprised if they turn around and try to catch another bullet."
The lawsuit with Bigland, a top executive still employed by the company, isn't likely to resolve simply, either. He is an unlikely whistleblower, further complicating the matter for FCA. His high-level status makes him an especially valuable witness for the SEC, which is usually inclined to share information with the Department of Justice if it suspects criminal activity.
"This (SEC) investigation could go in a brand-new direction," said Peter Henning, a law professor at Wayne State University and former federal prosecutor. "That's a real danger for FCA."