Howes: Summer shutdown delivers high drama in UAW corruption, GM RICO suit
Leaders of the Detroit-based auto industry are supposed to be on vacation this week.
Instead, the heads of two automakers and the United Auto Workers are preparing for separate high-stakes meetings with federal officials that could reshape the contours of the business and imperil independent control of the union in ways few could have predicted just a few years ago.
UAW President Rory Gamble, burdened with the results of a years-long federal corruption investigation, is scrambling to satisfy the reform demands of U.S. Attorney Matthew Schneider in advance of their meeting set for Tuesday. And that comes as General Motors Co. CEO Mary Barra weighs how to press a racketeering lawsuit against a cross-town rival that U.S. District Judge Paul Borman calls “a waste of time and resources.”
The nexus connecting the two cases is former Fiat Chrysler Automobiles NV CEO Sergio Marchionne’s alleged attempt to corrupt and co-opt union leaders in a years-long scheme to tilt the bargaining process against rival GM and weaken it financially so he could orchestrate a merger he would control. The narrative is stunning, captivating industry and union insiders even as most of the nation and the national news media yawn.
Their loss. It's not every day that a president of the UAW pleads guilty on corruption charges; that Gary Jones's predecessor, Dennis Williams, is implicated and likely to be charged, too; that two retired vice presidents are convicted; that the U.S. Attorney for the Eastern District of Michigan makes clear that direct elections of senior leadership and a federal takeover of the union — punishment meted out to the International Brotherhood of Teamsters 30 years ago — might be the cost of reform.
Nor is it common for a Detroit automaker to cite federal racketeering law, the weapon most closely associated with battling organized crime, in a legal assault on a competitor. But that's exactly where GM is aiming its RICO case against FCA, a potentially powerful (and very expensive) culmination of Marchionne's grand scheme to consolidate the American auto industry into a Detroit-based colossus he would control.
He failed and died two years ago in a Zurich hospital. The legacy of Marchionne's tenure lives on in the UAW corruption investigation, GM's racketeering case against FCA, and the No. 3 automaker's attempt to bury that past and move on and consummate its transatlantic deal with France's Groupe PSA, maker of Peugeot and Citroën vehicles.
Moving on will not be so easy — for the UAW or FCA. The details of corruption that federal investigators trace to the early days of Chrysler's emergence from federally induced bankruptcy in 2009 expose a systemic rot infecting more than "a few bad apples." And if GM prevails in its effort to begin discovery in its racketeering suit against FCA, the stream of revelations so far could become a flood with unpredictable ramifications.
The risk to FCA? That newly revealed facts threaten its merger plans or scuttle the Italian-American automaker's effort to reach a settlement with federal officials, instead forming a basis for a deferred prosecution agreement likely to require a public admission of wrongdoing. GM would know — it admitted to failing to disclose to federal regulators a safety defect in its airbag inflators and to misleading American consumers about the same defect.
The crisis delivered an undeniable reckoning to GM, empowering Barra and her team to begin dismantling an insular, even secretive, culture that favored butt-covering over accountability. And as a string of industry scandals mounted — Volkswagen AG's "dieselgate," the ugly family fight at Renault-Nissan, FCA's funding of UAW corruption — GM called FCA's bluff and sued it under federal racketeering law.
"We filed a lawsuit against FCA for the same reason the U.S. Department of Justice continues to investigate the company: former FCA executives admitted they conspired to use bribes to gain labor benefits, concessions and advantages," GM wrote in a petition asking the U.S. 6th Circuit Court of Appeals to reassign the case. "Based on the direct harm to GM these actions caused, we believe FCA must be held accountable. Not pursuing justice rewards wrongdoers at the expense of honest, hard-working people."
The same could be said for the pile of evidence documenting UAW corruption, much of it tracing back to Gamble's two most recent predecessors and their minions. The new UAW president is pushing to show movement in his reform campaign lest Schneider and his team of prosecutors push for a takeover that requires amending the union's constitution to allow direct elections, installs federal financial oversight and brooms much of the governing International Executive Board.
On Monday, Gamble posted an "Update on Reforms" that touted a "comprehensive reforms agenda and top-to-bottom review of our operations and financial house. One of the many reforms we promised to our membership was to work very hard to return any dues dollars that were inappropriately spent."
He said Williams, a former president, had reimbursed the UAW $55,000 in "travel expenses that were not appropriate." And Gamble confirmed the union is finalizing the sale of a lakefront home built for Williams at the UAW's compound on Black Lake in northern lower Michigan. Asking price: $1.3 million.
The decade-long saga of corruption inside Detroit's auto industry isn't over. Its most consequential chapters, shaped by federal investigators and the evidence they've produced, are getting underway during traditional summer doldrums proving to be anything but.
Daniel Howes is columnist and associate business editor of The Detroit News. His column runs most Tuesdays, Thursdays and Fridays.