Howes: Corruption probe, fines loom ahead of UAW contract talks
It’s gonna be an interesting summer.
Roughly a month before United Auto Workers bargainers begin national contract talks with Detroit’s automakers, federal authorities investigating industry corruption are sending an unambiguous message to potential targets: we’re not finished.
Fiat Chrysler Automobiles NV’s negotiations to reach a settlement of $50 million or less with the feds, reported Wednesday by The Detroit News, and to end the probe into the automaker’s involvement in the scandal suggests the investigation is closer to publicly identifying individuals it could prosecute.
FCA’s push to reach a resolution signals CEO Mike Manley's eagerness to cut his losses, to move on and to close yet another costly case he inherited from his predecessor, Sergio Marchionne. Others include a deal earlier this year to settle claims that Ram and Jeep diesel engines used illegal software to cheat emissions tests, as well as a continuing federal investigation into charges FCA inflated its monthly sales reports.
Who can blame Manley? Ol’ Sergio’s legacy — however presciently he saw looming change, however much he’s credited with reviving the transatlantic fusion given up for dead a decade ago — is also proving to be a costly one that raises questions about the underside of the culture The Boss left behind.
The head of U.S. sales and the Ram brand, Reid Bigland, filed a whistleblower suit alleging he’s being made a scapegoat in the federal sales reporting case. He claims fellow executives are retaliating against him for cooperating with the Securities and Exchange Commission, slashing his pay by 90 percent.
A former vice president of labor relations, Alphons Iacobelli, is in prison, convicted in connection with the corruption investigation. In statements during and after his trial, he insisted the practices that led to his conviction didn’t originate with him.
The diesel agreement reached in January obligated the Italian-American automaker to pay roughly $800 million to settle lawsuits alleging the company installed illegal software to elude emissions tests. Among the aggrieved: the Justice Department, federal regulators, the state of California and affected owners.
The only thing more costly to FCA than a federal corruption probe appears to be allegations of cheating on emissions tests — just ask Volkswagen AG. Its duplicitous scheming with so-called "defeat devices" radicalized regulators from California and Washington to Berlin and Paris, cost the German automaker billions and hastened the death of diesel in Europe.
Garden-variety corruption's turning out to look a whole lot cheaper than willful emissions deception, whatever the former says about the industry's (and FCA’s) stubbornly enduring attitude toward chummy, if illegal, self-dealing.
Beyond that rather glaring double-standard, the only difference is who's being deceived: the general driving public being told their diesel vehicles burn cleaner than they do, or union members whose interests should be represented honestly and free from graft.
But in the case of FCA and its joint National Training Center in Detroit funded with corporate dollars, that’s not how it often worked. Whatever hangs over contract talks beginning next month — fears of Trump trade wars, General Motors Co.’s U.S. plant closings, whether bargainers will win base-wage increases for the rank-and-file — the most challenging for FCA and the union to get past will be the long shadow of corruption.
And whether investigators in the U.S. Attorney’s office in Detroit are poised to indict more current and former union officials amid what are shaping up to be the most contentious auto talks since Chrysler and GM emerged from bankruptcy a decade ago. If FCA's move to settle its case is any indication — and I suspect it is — some union folks likely are legally exposed.
It bears repeating that the UAW, as well as FCA and its predecessor U.S. companies, are cornerstones of the modern American auto industry, every bit as important as GM and Ford Motor Co. Where the continuing federal investigation leads, and what it may expose, likely would shake the industry's foundation generally and hamper the union's ability to organize outside Big Three plants.
None of that goes does much to bolster the credibility of the current union leadership. Or, for that matter, the folks on the other side of the table whose employer is paying big bucks to make federal headaches go away. Yup, credibility is hard-earned — and not easily recovered once its lost.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him at 3 p.m. and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM