The Detroit Three automakers and the United Auto Workers are using national contract talks to restructure operations of their joint-training centers ensnared in a federal investigation into union corruption, The Detroit News has learned.
At least two of those corporate-funded training centers — those operated by Fiat Chrysler Automobiles NV and General Motors Co. — have been focal points in the continuing probe that so far has charged 11 people, produced nine convictions and implicated UAW President Gary Jones. Ford Motor Co.’s joint center has not been named in any criminal charges.
“The problem was always that there was a lot of money out there in this joint training fund,” said Arthur Schwartz, a former general director of GM labor relations. “There was always this fear that it wasn’t being managed correctly. We always did audits, but an independent audit doesn’t always catch everything.”
Talks to restructure the joint-training center model are among the latest evidence that the federal corruption crackdown is poised to reshape how the Detroit-based industry operates, how corporate dollars are appropriated, how union leaders spend member dues, on what and for whom.
All three automakers are interested in altering the way the centers operate, three sources familiar with the situation told The Detroit News, even as union bargainers rattled by the scandal are said to recognize the real and perceived liability the centers represent. Corruption inside the UAW-FCA training center sparked the federal investigation that is now targeting senior UAW leaders, including the sitting and immediate past presidents.
Any new model for the training centers largely would depend on negotiations between the UAW and GM that continued Monday in Detroit as the union’s longest national strike against that automaker since 1970 entered its fourth week. The UAW and the automakers would focus largely on restructuring outdated, tough-to-manage training center models, reducing administrative and infrastructure-related costs.
The automakers declined comment. A UAW spokesman, Brian Rothenberg, told The News Monday: “We are still in bargaining with GM and have not yet gone to the table at Ford and FCA.”
It’s not yet clear how the buildings housing the respective training centers — all located downtown on or near Jefferson Avenue — would be affected. But corporate support for joint-training programs likely would continue, if with tighter financial controls and lower structural costs.
A central concern: that corporate money, some of it not subject to audits and other financial controls, ended up in the hands of jointly appointed boards — boards that in at least the case of UAW-FCA, federal investigators found, mismanaged the funds.
The training centers received millions in funding from automakers, typically negotiated during national contract talks. The ongoing federal investigation found the money was spent on lavish gifts and shoes, Montblanc pens and a pricey Ferrari, an outdoor kitchen and a mortgage pay off by officials running the Fiat Chrysler and GM training centers.
Each automaker has a separate national training center run by a 501(c)(5) jointly established by the respective automaker and the UAW. Each automaker funds its respective training center based on a rate negotiated during contract bargaining. The Detroit Three each spent more than $30 million to fund the training centers as part of the 2015 contract with the UAW, according to tax documents.
The training centers were established more than three decades ago by the UAW and Detroit automakers to support job training, orientation and meetings for UAW members. The automakers built or bought buildings to house the centers.
Originally, automakers agreed to pay a nickel for every hour worked by UAW membership throughout the year to fund the training centers. That rate increased over time and a successive number of collective bargaining periods. More recently, automakers transitioned into a negotiated amount that was part of automakers’ annual budgets.
The money allocated by automakers for those training centers was controlled by an independent board of directors. In Fiat Chrysler’s case, those funds were mismanaged. The federal investigation into the use of training center funds netted convictions of a former FCA vice president for employee relations, Alphons Iacobelli, a former UAW vice president. Norwood Jewell, and Michael Grimes, a former administrative assistant to then UAW-GM Vice President Cindy Estrada.
The federal government has described sweeping conspiracies involving the use of GM and FCA training center funds that ranged from using the funds for kickbacks meant to influence collective bargaining, to buy lavish vehicles, to finance home renovations and contracts to vendors for watches and jackets.
And former UAW leaders, unsatisfied with the results of a “Clean Slate Agenda” touted in the wake of the earlier UAW-FCA revelations, now are calling for sweeping changes to the union, its entire 14-member International Executive Board and the joint-training centers.
“For the time being at least, the joint company-union programs that became pipelines for embezzlement should be suspended,” the Rev. Peter Laarman and Frank Joyce, two former UAW public relations directors wrote in a recent commentary. “An interim team should be assembled to operate the union and rapidly develop a process to transparently and democratically reconstitute the leadership of the UAW.”
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