(CNN) - The United Auto Workers union and General Motors are locked in difficult labor negotiations, and a late night Saturday deadline looms for a new contract — or a strike.
A deal just became much more difficult to reach.
UAW President Gary Jones was directly implicated late Thursday in a growing scandal involving the union and its finances, the Detroit News reported. It could further damage the necessary trust that rank and file union members have in the union's leadership during negotiations.
The scandal involves misappropriation of union funds, and in some cases, union officials accepting bribes from officials at one of the automakers, Fiat Chrysler.
Agents from the FBI, IRS and Labor Department had searched Jones' home late last month, an FBI spokesman confirmed to CNN. On Thursday a top union official, Vance Pearson, became the first active union official to be indicted in the scandal. Nine other people who have pleaded guilty in the scandal were former union officials, the widow of one union official, or employees at Fiat Chrysler who dealt with the union.
The indictment did not name Jones, but the Detroit News reported that he's one of the unidentified co-conspirators named in the government's filing, identified only as "UAW Official A." The News cited three unnamed sources for its report.
The allegation against the UAW president, even if only in a news report, could be bad news for GM in its hope of reaching a deal with the union at a difficult time for the industry, said Kristin Dziczek, vice president of industry labor and economics for the Center for Automotive Research, a Michigan think tank.
"GM has no interest in having a weakened UAW," said Dziczek. "They don't want to reach a tentative agreement with leadership on the other side of the table who can't get it ratified by rank and file."
Four years ago, union members only narrowly ratified deals with the three automakers, even without a scandal and the industry economics being better than they are today.
Negotiations were going to be difficult, even without the scandal
The three US automakers with UAW contracts, GM, Ford and Fiat Chrysler, are all dealing with slower sales and the need to make huge multi-billion-dollar investments in developing electric and self-driving vehicles that have more long-term potential than current market demand.
To save money for those efforts, GM has already halted operations at three plants — two transmission factories and an assembly line in Lordstown, Ohio. It plans to shut another assembly line in Detroit, its last Detroit factory, early next year.
The UAW has vowed to win GM's agreement at the negotiating table to keep all or at least some of those plants operating.
The UAW did not immediately respond to a request for comment on the Detroit News report. As for the indictment, it said the legal problems would not stop it from reaching a deal that is in the best interest of its 46,000 members at GM.
"Our highest priority is maintaining the trust and confidence of United Auto Worker members," the union statement said. "While these allegations are very concerning, we strongly believe that the government has misconstrued any number of facts and emphasize that these are merely allegations, not proof of wrongdoing. Regardless, we will not let this distract us from the critical negotiations underway with GM to gain better wages and benefits for the more than 400,000 members of our union."
But the union's executive board is set to meet Friday afternoon, and it is not clear if Jones will be able to stay in office. If he leaves office either temporarily or permanently, it may be necessary to temporarily extend the contract past the 12:01 a.m. Sunday expiration in order to give the new leadership time to get up to speed in the talks.
"With everything going on, it seems extremely unlikely they get to a tentative agreement by the Saturday deadline," said Dziczek. "So we get either an extension or a strike. Those are the choices."
If there is a strike, it would be the first since GM and Chrysler workers walked out in 2007. It would also be the largest US strike at any business in 12 years.
GM wouldn't comment on whether or not it believes the union scandal will affect its negotiations.
"GM is outraged and deeply concerned by the conduct of union officials as uncovered by the government's investigation and the expanding charges," is said in a statement.
An extension of the contract would not be unprecedented. In fact, the union generally extends the contract with two of the automakers as it tries to reach a deal with a "target" selected among the three. That's what happened when GM was tapped as the target just after Labor Day, while the deals at Ford and Fiat Chrysler were extended.
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