The wages of corruption: The Fiat Chrysler UAW scandal

40981By James Napier

The indictments involving a Fiat Chrysler exec and a UAW official should confirm long-held suspicions that “team concept” and cooperation between union and company leads to bad contracts, and sapping the fighting spirit of the members. US federal charges have been laid against Al Iacobelli, former VP of Fiat Chrysler, and Monica Morgan, wife of former UAW VP General Holiefield (Holiefield himself was not indicted because he died in 2015). Charges may be laid against further company and union officials.

Despite Fiat Chrysler and UAW claims, this is not the result of a few corrupt individuals – it is the inevitable consequence of decades of a culture of class collaboration. The problem is union leaders who start to identify more with corporate executives than with the workers, and who see union office as a path to self-enrichment. This scandal also raises questions about the 2016 negotiations between GM and Unifor, representing Canadian GM workers – since Iacobelli was a leading member of the GM management team (GM had hired Iacobelli after he ‘left’ Fiat Chrysler).

“Fat, dumb and happy”

Iacobelli and Holiefield conspired over at least 6 years to both enrich themselves, and also, to pay off other top UAW reps, in what was described as an effort to keep the union reps “fat, dumb and happy”. The brazen theft involved diverting funds from the negotiated National Training Center (NTC) to pay for such things as a Ferrari Spider ($350,000) and 2 solid-gold Mont Blanc pens ($37,500 each) for Iacobelli, and paying off the mortgage on the house owned by Morgan and Holiefield ($262,219). But the most important lesson to learn is that the source of the corruption was the culture of labour-management cooperation, or “team-concept” that has spread like a cancer through the North American labour movement.

Jointly-administered slush fund

Fiat Chrysler contributed between $13 million and $31 million per year to the NTC, a joint company-union program that was supposed to provide education and training for union members. Corrupt practices were made easier because the fund was designed to serve as a slush fund, jointly administered by Iacobelli and Holiefield with no oversight. Funds were siphoned off directly to pay for air travel and lavish hotel suites including a four-night stay for Holiefield (at $3,100 per night) in the Beverly Hills Hotel in California. Credit cards were issued to senior UAW negotiators, as described in this Detroit Free Press account on July 27:

Starting in 2012, Iacobelli saw to it that Holiefield and other senior UAW officials obtained National Training Center credit cards. He directed Durden [a Fiat Chrysler Financial Analyst] to obtain the cards. The financial analyst obliged. And the union officials were encouraged to use them for personal expense. According to the indictment, Durden reported that he, Iacobelli and others at FCA “had created a liberal spending policy for the NTC-issued credit cards as part of their effort to keep the senior members of the UAW Chrysler Department ‘fat, dumb and happy.’ ” The cards were used liberally. The indictment alleges Holiefield made more than $200,000 in personal purchases on his credit card, including jewelry, furniture, designer clothing and other items. Iacobelli authorized the charges. Durden collected Holiefield’s credit card statements, instructing members of the NTC accounting staff “not to open, examine or review the NTC credit card statements.”

Phony children’s charity

Even more distasteful was the fact that Holiefield created a fake children’s charity, the “Leave the Lights on Foundation”. Iacobelli funneled hundreds of thousands of dollars from the NTC through the foundation to Holiefield and Monica Morgan. Companies owned by Morgan received money from the foundation and from the NTC, including getting the contract to provide T-shirts, mugs and other items to the NTC without submitting a quote or a bid. Most of that money went to Morgan and Holiefield’s lavish personal expenses. In the words of Fiat Chrysler’s financial analyst Durden, the payments were “an investment in relationship building” with Holiefield.

Two-tier wages and brutal 10-hour shifts

What did Fiat Chrysler get in return for this investment? As reported by David Barkholz in the Automotive News June 9, 2015:

FCA negotiated the best contract of the Detroit 3. FCA’s overall labor costs since the four-year UAW contract was signed in the fall 2011 have nudged up less than 1 percent per year. Consequently, FCA enjoys nearly a $10 an hour labor cost advantage over Ford and GM.

In addition, Fiat Chrysler gained the union’s support in implementing a brutal Alternative Work Schedule (AWS) of regular 10-hour days with no overtime pay. The AWS is also known as the 3-2-120 schedule because three crews work two shifts for 120 hours a week. For example, at the Jefferson North Assembly plant in Detroit, the “A” crew works 10 hours a day on day shift from 6 a.m. to 4:30 p.m. Monday through Thursday. The “B” crew works 10 hours on night shift 6 p.m. to 4:30 a.m. on Wednesday through Saturday. The “C” crew works 10 hours on the night shift Monday and Tuesday and 10 hours on the day shift Friday and Saturday.

Both Fiat Chrysler and the UAW now claim that the corruption was just the acts of individuals. They both say they “didn’t know”. But Holiefield and the other UAW reps at Fiat Chrysler were not acting on their own in capitulating to management demands. The concessions they made were part of the overall strategy of concession bargaining followed by the UAW leadership for many years. In 2007 the UAW had agreed to allow the auto companies to hire second tier workers at half the regular rate with inferior benefits and no pensions. Even before that, the UAW leadership had argued that workers had common interests with the corporations, and that they had to help keep the companies “healthy” and profitable by implementing “team concept”. The UAW had agreed to joint programs and joint funds back in the early 1980’s. Since management still made the decisions, this so-called “team concept” just meant the union became tied in to enforcing those decisions. It was just a capitulation to the corporations, who always strive to maximize their profits, pay workers the least they can get away with, and speed up the work until it is destroying the health of the workers. What is desperately needed are union leaders that understand that “the working class and the employing class have nothing in common” – and that their role is to fight for the working class.

CAW/Unifor leaders also cozy up to corporate execs

Instead of fighters, we have union officials who would rather rub shoulders with corporate executives and their political lapdogs than associate with the workers. This has been the case with the autoworkers in Canada as well. Former Canadian Auto Workers President, Buzz Hargrove swooned when he got a pat on the head from Magna head Frank Stronach – and gave him the infamous no-strike agreement in return. This was a pattern with Buzz – he liked to chum around with corporate execs, like ONEX head Gerry Schwartz. After Buzz was taken on a tour of Israel at Schwartz’s expense, he turned into an apologist for the Israeli onslaught on Gaza. Later, Buzz delighted in putting a union jacket on then Liberal Prime Minister Paul Martin.

In 2013 the CAW merged with the CEP and formed Unifor. The current Unifor president, Jerry Dias is following the same political path as Hargrove. He is smitten with Canadian Prime Minister Justin Trudeau, and supports the Ontario Liberal government of Kathleen Wynne.

Last year at a General Motors photo op announcement in Oshawa, attended by Trudeau and Wynne, Jerry refused to sit with members of the union local (Unifor Local 222) because he wanted to be as close as possible to the GM executives and Trudeau (see picture). A few months later, at the Oshawa ratification meeting for the new GM contract, Jerry was being questioned by a member of Unifor Local 222 who was calmly asking a reasonable question. His response was “You’re a f-ing idiot”.

Is Al Jerry’s Pal?

Most disturbingly – listen to Jerry’s response to the charges of fraud against Al Iacobelli:

“Jerry Dias, president of Unifor, the union that negotiated with Iacobelli for Canadian autoworker contracts, said he always viewed him as a professional labor executive.

I’ve probably known Al for 15 years. … This is right out of left field. I never would have expected it,” Dias said. “I’m in shock, to say the least.”

Could Jerry really have been totally unaware of the corrupt dealings between Iacobelli and UAW reps? He says he was “shocked” – Unifor members would like to know if he was also angry and working to prevent similar abuses here. There was widespread opposition to the 2016 contracts between Unifor and the auto companies. Many members were angry that new hires on the assembly line start at $15 per hour less than longer-term workers, and won’t get equal pay for more than 10 years. They also get an inferior pension. The ratification votes at all three companies were the lowest in the history of the Canadian union. Did Jerry’s demonstrated chumminess with corporate leaders and Liberal politicians influence what was negotiated? What was Iacobelli’s role in the GM negotiations? Despite the indictments, General Motors has so far refused to comment on Iacobelli’s employment status. When GM hired him in January 2016, they said he would be heading up the Canadian negotiations with Unifor. This week, sources told the Detroit News that Iacobelli had been suspended by GM after he was indicted, but it is unclear if he was suspended with pay.

UAW and Fiat Chrysler Cover-ups

After Iacobelli was indicted, Fiat Chrysler said they had fired him when they became aware of his fraud. But at the time Iacobelli left, they were happy to leave the impression that he had retired. Similarly, the UAW allowed Holiefield to serve out his term of office and retire with a pension in 2014, even though there had persistent complaints about Holiefield’s corruption for years. Even the indictment mentions that the then UAW President had cautioned Holiefield and Iacobelli over their financial dealings in 2011. Both the corporation and the union preferred to cover things up to preserve their public image.

Now that the indictments have come down, both the company and the union swear that the corruption had no influence on negotiations between the two. If you believe that, you must believe that Brian Mulroney had provided nothing in return for the three envelopes containing $300,000 in cash that Karlheinz Schreiber handed him in hotel rooms.

But the biggest thing that the UAW leadership and Fiat Chrysler want to cover up, is that their dedication to “labor-management cooperation” is to the benefit of the corporation and is against the interests of the union members. If the union had a culture of uncompromising struggle against the corporate elite, the union official that wanted to rub shoulders with executives and flaunt a lavish lifestyle would have stuck out like a sore thumb.

This piece was first published by the Unifor Solidarity Network

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