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GM's secret weapon to hold off Fiat Chrysler may be tax breaks


Gorehamj
  • John Goreham
    Contributing Writer, GM-Trucks.com
    6/22/2015
    The hand-wringing has begun in the financial world. Again - this is not our strongest point when it comes to automotive knowledge, but the money magazines and media are all talking about a possible GM - Fiat Chrysler Automobiles US (FCAUS) merger. In our prior report, we pointed out that if the head of FCA US wanted to force a merger discussion with GM he might be able to do so by having key GM stockholders see things his way. The most recent news according to Forbes, is that GM may have an ace in the hole - Tax breaks

When GM went through its bankruptcy restructuring, it wasn't a typical one. GM was allowed to get rid of what it didn't want (debt, dealerships, brands, liability) and keep what it wanted - Billions in tax breaks it had accumulated while it was the "old GM." In case you're wondering, that never happens. The usual deal is the company that goes through the restructuring starts over with a new tax situation.
It isn't small money. GM still has $34 BILLION in tax breaks it can apply to profits. As the Forbes story and many others point out, GM does not have to pay taxes on its profits for decades if it chooses not to. Apparently, in a merger those breaks would be lost. What the Forbes story assumes is that a GM merger would have to be structured like other mergers and follow financial rules and laws.


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