UAW President Gary Jones withdraws after GM sues rival over union bribe

DETROIT – United Auto Workers President Gary Jones abruptly resigned Wednesday, unveiling a violent day that forced union leaders to remove him, and General Motors accused rival Fiat Chrysler in a case of bribing unions to get more favorable contract terms from UAW.

Jones has notified the union that he would resign, his lawyer, Bruce Maffeo of New York, said in an email.

The news of Jones' resignation came shortly after the UAW's international board sent papers to ban him and Regional Director Vance Pearson from the allegations raised by a federal union corruption investigation that has resulted in several arrests that started in 201[ads1]7. The transition to remove the two leaders would have brought union negotiations for both.

Pearson faces criminal charges while Jones is not charged, but federal agents raided his suburban Detroit home in August.

In the email, Maffeo said Jones decided to step d own before learning about the move to remove him.

Jones, who has been a UAW member for 44 years and started as a factory worker, stepped down to let the union focus on its core mission of improving members and their families' lives, Maffeo said.

Pearson's status in the federation was not clear late Wednesday. A message was left to get comment from his lawyer.

Jones' departure came just hours after General Motors

GM, -3.02%

filed a lawsuit against Fiat Chrysler

FCAU, -3.72%

claiming that its rival rival had an unfair business advantage by bribing UAW officials.

The outstanding lawsuit, filed Wednesday in U.S. District Court in Detroit, alleges that the FCA was involved in racketeering by paying millions in bribes to obtain concessions and gain benefits in three labor agreements with the union.

The lawsuit alleges that Fiat Chrysler destroyed the UAW negotiation process in union contracts 2009, 2011 and 2015 to gain benefits over General Motors.

"The FCA was the clear sponsor of pervasive offenses, and paid millions of dollars in bribes to obtain concessions" from the union, said GM Attorney General Craig Glidden. "FCA's manipulation of the collective bargaining process resulted in unfair labor costs and operational benefits to it, and caused harm to GM."

In a statement, Fiat Chrysler called the lawsuit "meritless" and said it would defend itself vigorously. It also accused GM of trying to disrupt the proposed merger with French carmaker PSA Peugeot, as well as ongoing contract talks with UAW.

"We are surprised by this submission, both the content and the timing of it," Fiat Chrysler said. "We intend to vigorously defend ourselves against this worthless lawsuit and pursue all legal action in response to it."

In his complaint, GM Fiat Chrysler accused CEO Sergio Marchionne, who died last year, of authorizing bribes worth more than $ 1.5 million to union officials in a scheme to impose unexpected labor costs on GM. The higher costs were developed to force GM to merge with the FCA, which had rejected Marchionne's offer to combine the companies, the lawsuit states.

Erik Gordon, a professor of business and law at the University of Michigan, said that one company sued another over bribes to union officials is without precedent. While GM's charges are credible given what federal prosecutors have already uncovered, it will have the burden of convincing a jury that the scheme actually happened, Gordon said.

In addition to Fiat Chrysler, GM's lawsuit names former FCA Labor Relations Manager Alphons Iacobelli, and former FCA officials Jerome Durden and Michael Brown as defendants. Everyone has pleaded guilty to the federal corruption probe, which has alleged that Fiat Chrysler bribed UAW officials to keep them "fat, dumb and happy."

Authorities have said payments were made through a jointly-run fitness center run by the company and UAW. Durden handled the training center's finances, and Brown helped run the center.

After leaving Fiat Chrysler, Iacobelli joined GM's employment department in 2016. He was suspended following his indictment and fired in December 2017.

UAW said it had several guarantees to ensure the integrity of the contracts negotiated with Fiat Chrysler, including reviews from local and international unions.

"We are confident that the terms of these contracts were not affected by Iacobelli's behavior, nor by UAW officials involved in the misuse of joint program funds at the FCA," the statement states.

The UAW states that it is committed to making the changes necessary to ensure that behavior never happens again.

Glidden told reporters that in the three UAW contracts, the FCA could reduce labor costs because the union allowed it to hire more temporary and lower-paid workers than GM. [19659002] In 2007, the union agreed that new hires would be paid less than long-term workers, and set up a "second tier" of employees who were paid less. The FCA has more workers from other levels than some of its Detroit competitors.

The Center for Auto Research, an industry think tank, calculated earlier this year that Fiat Chrysler's total labor costs including wages and benefits were about $ 55 per hour, giving it a $ 8 per hour advantage over GM and a $ 6 over Ford.

Glidden said GM is not suing the UAW because it believes the responsibility lies with the FCA, which was the "orchestrator" of the conspiracy.

He said GM is seeking substantial damages in the case, but he could not give a specific amount. The lawsuit states that GM is not seeking to reduce wages or benefits for some UAW workers.

Last week, a retired union president and former GM board member became the 13th person to be screened in the federal union probe and auto companies.

Joe Ashton is accused of receiving millions of dollars in setbacks from a contractor who made watches for union members. The 58,000 bells, purchased through the GM-UAW Joint Training Center, are still in storage five years later.

Last month, Union struck with GM after a 40-day strike, and Ford workers reached a deal shortly after. Intense talks with Fiat Chrysler began on Monday, with the possibility of another strike in part because of union members' distrust of UAW leadership.

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