GM lawsuit could cause trouble for FCA and PSA Group talks

21 November 2019

Fiat Chrysler Automobiles (FCA) is facing a lawsuit by General Motors (GM) over allegations of bribery affecting the US carmaker’s wage bills. This development could cause problems in the proposed merger between FCA and French carmaker PSA Group.

Any fine that could potentially be imposed on FCA will need to be accounted for and discussed in merger talks. Should GM win its case, the impact on FCA in the US could be detrimental to potential sales of PSA vehicles. The Italian carmaker’s stronghold in the overseas market is one of the key advantages PSA Group is seeking in the merger.

GM maintains its rival carmaker had obtained unfair advantages by bribing officials of the UAW union. This led the carmaker to pay billions of dollars in higher wages and other workforce costs after bargaining talks were corrupted by these alleged payments.

It is understood that part of the intention was to weaken GM over time, in order to make an eventual merger with FCA more likely, the lawsuit alleges. The lawsuit names Sergio Marchionne, the former FCA chief executive who died last year, as a central figure of the scheme, but also names FCA as a defendant, as well as several FCA executives.

GM, which the UAW chose as the first target of this year’s contract negotiations, lost six weeks of production as workers went on strike after talks broke down. GM has estimated the cost of the strike to be nearly $3 billion, and the resulting deal gave workers larger signing bonuses and steeper raises than the automaker had proposed.

Accountable actions

′This lawsuit is intended to hold FCA accountable for the harm its actions have caused our company and to ensure a level playing field going forward,’ said Craig Glidden, GM executive vice president and general counsel in a statement.

The UAW, which represents workers in the US automotive industry, has been under investigation in 2017 over corruption that saw some of its bosses accepting bribes from FCA.

Derailing efforts

If the merger talks are successful, the arrangement would also see FCA and its combined French partner overtake GM in global scale.

A spokesman for FCA said: ″We are astonished by this filing, both its content and its timing. We can only assume this was intended to disrupt our proposed merger with PSA as well as our negotiations with the UAW. We intend to vigorously defend against this meritless lawsuit and pursue all legal remedies in response to it.″

PSA Group has not commented, however the two sides have confirmed that talks over a merger are ′continuing smoothly’.