General Motors (NYSE: GM) has filed a lawsuit against the United Auto Workers alleging racketeering and duplicity between itself and Fiat Chrysler Automobiles (NYSE: FCAU). This allegation comes almost immediately after the conclusion of a strike between General Motors and the UAW that shut down operations for American auto plants for several weeks. In addition, this lawsuit could threaten Fiat Chrysler's attempts to merge with French automaker PSA and serves as another threat to the stability of the global auto market in the face of changing buying trends and increased costs to make a vehicle.
The maker of Chevy, Cadillac, and GMC vehicles alleges in its new lawsuit that the type of bargaining that the UAW was engaging in with GM put it at a disadvantage compared to how it bargained with FCA. GM's lawsuit alleges that FCA executives and liaisons with the union, which covers nearly 400,000 auto workers in the United States and Canada, bribed union officials to agree to terms that were favorable to FCA and impeded GM's means of staying competitive.
GM decided to argue that the UAW violated the Racketeer Influenced and Corrupt Organizations Act (RICO), an act that has most notably been used by federal officials to put the leaders of organized crime families in jail. However, one of the most important parts of a RICO case is proving that the alleged racketeers hurt the profitability of the aggrieved company. General Motors' stock price has certainly not suffered over the last few years. Since emerging from bankruptcy in late 2010, GM stock dipped below $20 in 2012 but has stayed steady in recent years, keeping within a band of $25 and $45 for the past five years. However, a complicating factor in all of this is the actions of deceased Fiat Chrysler CEO Sergio Marchionne, who worked behind the scenes to try to take over or merge with GM. The lawsuit alleges that Marchionne illegally worked with UAW bosses to try to damage GM to get more favorable terms for a buyout. The current CEO of FCA, Michael Manley, has no allegations against him.