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Fiat Chrysler brushes off GM lawsuit, sees Peugeot deal by year end

Fiat Chrysler brushes off GM lawsuit, sees Peugeot deal by year end
FILE PHOTO: Mike Manley, head of Jeep, presents the Jeep Wrangler Sahara and Rubicon models (L and R) to the media at the Los Angeles Auto Show in Los Angeles, California U.S. November 29, 2017. REUTERS/Lucy Nicholson/File Photo -
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By Giulio Piovaccari and Gilles Guillaume

TURIN/PARIS (Reuters) – Fiat Chrysler (FCA) on Thursday brushed off a shock lawsuit from General Motors (GM) and said it was confident of reaching a binding merger deal with Peugeot owner PSA Group by the end of this year to create the world’s fourth largest carmaker.

GM <GM.N> filed the lawsuit in the United States on Wednesday, alleging FCA had bribed United Auto Workers (UAW) union officials over years to corrupt the bargaining process and gain advantages, costing GM billions of dollars.

FCA <FCHA.MI> said the suit, seeking substantial damages, was “meritless” and appeared intended to disrupt the Italian-American company’s planned $50 billion merger with France’s PSA <PEUP.PA>.

“The GM lawsuit will be dealt with in appropriate places, but as we’ve said already it is absolutely groundless and so it does not worry us,” FCA Chairman John Elkann told reporters at a strategy briefing for Exor, the holding company of the Agnelli family which is FCA’s largest shareholder.

“Looking at how teams are working, both in FCA and PSA, I am encouraged to say that between now and year-end, we’ll have a binding memorandum signed,” he added.

At 1345 GMT, FCA shares were down 2.4% at 13.64 euros, off an earlier low of 13.27 euros. PSA was up 0.7% at 22.66 euros.

Earlier, a source close to FCA said the lawsuit would not lead the two companies to review their valuations in the proposed tie-up. PSA declined to comment on the lawsuit and its potential impact on the merger talks.

LONG-TERMINVESTORS

FCA and PSA announced plans last month to combine forces to better tackle the cost of new technologies such as electric and self-driving vehicles as well as a downturn in auto markets.

In a letter to employees about the GM lawsuit, FCA Chief Executive Mike Manley said: “We are astonished by this filing, both its content and its timing. We can only assume it was intended to disrupt our proposed merger with PSA.”

In September 2015, FCA’s former Chief Executive Sergio Marchionne urged GM counterpart Mary Barra to consider a tie-up of the two carmakers. GM rebuffed FCA’s advances.

GM on Wednesday alleged that, after it rejected a merger bid from FCA, Marchionne conspired to negotiate a new four-year contract with the UAW “designed, through the power of pattern bargaining, to cost GM billions.”

FCA will vigorously defend itself against this “meritless” lawsuit, Manley said in the letter to staff, seen by Reuters.

“We will not be slowed down by this act,” he said, adding: “Let’s keep the performance up as it has clearly got some of our competitors worried.”

Manley was not named in the GM complaint and the source close to FCA said he was not linked to the case.

Elkann, a scion of the Agnelli family, also said Exor and the Peugeot family were committed to providing maximum support to the merged company and would provide stability for it in the years ahead.

“We’ve been stable investors in the auto industry for the past 120 years, so, yes, I still see ourselves as stable investors in the auto industry in the next 10 years,” Elkann said of Exor.

(Reporting by Edward Taylor in Frankfurt, Gilles Guillaume in Paris and Giulio Piovaccari in Turin; Editing by Mark Potter and Keith Weir)

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