GM supports tax reform, but is still benefiting from old credits – Detroit Free Press
Don’t expect General Motors to benefit anytime soon from President Donald Trump’s push for tax reform, even though the automaker supports the idea.
That’s because GM is still reaping tax benefits from the massive losses leading up to its 2009 bankruptcy and federal bailout.
Although GM supports Trump’s bid to lower the corporate tax rate, Chief Financial Officer Chuck Stevens said today it wouldn’t affect GM for about five years.
Because of a tax ruling issued during the Obama administration, GM is allowed to use pre-bankruptcy losses to offset future tax bills.
GM still has $35 billion of losses on its books from the past. The automaker was able to defer taxes caused by net operating losses that occurred over three years prior to the bankruptcy.
If corporate tax reform is adopted, GM would have to take a one-time accounting charge, Stevens said, but its overall tax rate would not be impacted.
That’s an extra sweetener for the New GM, which is a vastly more efficient, innovative and profitable company than the shadow of Old GM.
GM posted net income of $2.6 billion, up 33% from the same period a year ago. The company said North American sales of trucks and SUVs and a strong performance in China fueled the strong quarter.
“We are in favor of tax reform, we think it’s good for the economy, good for consumers, good for businesses,” Stevens said after the company reported earnings today.
One risk factor for GM is the possibility that Trump will crater the North American Free Trade Agreement, which he has pledged to renegotiate after threatening to terminate it. GM has been investing in its plants in Mexico and builds some of its Chevrolet Silverado and GMC Sierra pickups in Silao, Mexico.
Like other automakers, GM opposes a major disruption to NAFTA. Stevens said the company would welcome an effort to simplify and modernize the trade agreement but only at a reasonable pace.
“We certainly support improving NAFTA where it makes sense. Any changes need to be phased in … there needs to be a period of time to adjust,” Stevens said. “But again, we are in favor of strengthening NAFTA.”
While GM supports the concept of tax reform, Stevens said it’s difficult to react to the bare-bones outline Trump provided to Congress earlier this week.
“What was rolled out earlier this week was obviously not very detailed so it’s hard to provide any real perspective because there is still a lot of uncertainty,” Stevens said. “But from a general overall position, we certainly favor it.”
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