DETROIT -- General Motors executives had laid the groundwork for a new labor agreement with the UAW in September 2015. The company had met most of the union’s demands with a proposal that would have boosted pay and benefits by almost $1 billion over four years.
If the UAW’s then-President Dennis Williams had agreed and the deal been ratified, it would have set a precedent for similar accords between the UAW and Ford Motor and Fiat Chrysler Automobiles. But instead, Williams balked and went to FCA to cut a pattern-setting deal that pushed GM’s four-year labor costs up by $1.9 billion.
The roughly $1 billion difference seemed like hard luck at the time, but suspicions arose at GM headquarters when Al Iacobelli, FCA’s former labor relations chief who later joined GM, was indicted in July 2017, according to people familiar with the matter. Federal investigators charged him for tapping into a union training-center fund for years to buy himself a Ferrari and Montblanc pens, and to lavish union officers with $1.5 million in cash and gifts. GM attorneys began to suspect Williams and other union leaders may have been swayed by graft to favor FCA at their expense, a charge current UAW leaders deny and that the Justice Department has not made.
The Iacobelli case set off a more than two-year effort by GM’s legal staff to establish a pattern of coziness between the UAW and FCA, leading to an unprecedented step: hitting its rival with a federal racketeering lawsuit. Bloomberg spoke with several people involved in the lawsuit and pored over court filings to assemble this detailed account of the evidence GM’s lawyers pieced together to convince CEO Mary Barra they had a strong case of unfair behavior by FCA and the union.
When Iacobelli pleaded guilty to violating labor laws, alarm bells went off in GM General Counsel Craig Glidden’s office. He and his attorneys became increasingly convinced FCA had bought off union officers as part of a strategy to gain a cost advantage. They also started doing forensic work to match up emails and key dates in the FCA-UAW scandal with overtures the company’s late CEO, Sergio Marchionne, made to pressure Barra into a merger she did not want.
Barra, 57, relied on her staff to sift through court filings and build a bribery case, even though she knew it would be incendiary. GM’s top managers did not make a final decision until days before filing the suit on Nov. 20. For Barra, the choice to move ahead rested on two key points. First, cheating to get a better labor deal offended her personal sense of fair competition. The second rationale was more pragmatic: If GM was injured financially, someone had to hold FCA accountable.
“I would just say, it was not a decision that we made lately,” Barra said during an investor conference last month. “It was something that we very, very carefully considered.”
FCA and its chairman, John Elkann, have denied the allegations. The company and UAW have said the nine former leaders who worked on past labor contracts and have been convicted of corruption acted on their own. Both have also noted that workers rejected the initial agreement FCA and the union reached in 2015, arguing that workers had final say and GM was not damaged.
Cindy Estrada, the UAW’s chief negotiator with GM in 2015, recalls events differently than how the company recounts in its suit. She said in an interview that the UAW walked on GM’s offer because management insisted on cutting profit sharing, which the union would not accept. Williams went with FCA’s offer because GM fell short on a key bargaining issue, she said in a phone interview.