Fiat Chrysler Is Told to Pay $1.6 Billion in Italian Back Taxes
December 05 2019 - 10:02AM
Dow Jones News
By Eric Sylvers
MILAN -- Italy is demanding EUR1.4 billion ($1.6 billion) in
unpaid taxes from Fiat Chrysler Automobiles NV, in another hit to
the car maker as it tries to complete its merger with Peugeot maker
PSA Group while defending itself against a major lawsuit from
General Motors Co. in the U.S.
The Italian tax authority said in October that Fiat Chrysler
understated the value of the recently acquired Chrysler when the
company moved its headquarters to the Netherlands in 2014. When
companies move their base out of Italy, they must pay a one-time
tax based on capital gains.
Fiat Chrysler disputes the Italian tax agency's numbers and said
it is confident of significantly reducing the amount that Italian
authorities want paid. A spokesman for the company said any
eventual tax debt would be offset by previous losses, leaving "no
material cash outflow or impact on earnings."
The tax affair comes as Fiat Chrysler is in the midst of
completing a EUR50 billion merger with Peugeot maker PSA Group.
While the Italian tax issue and the legal dispute with GM aren't
expected to derail the PSA deal, which Fiat Chrysler wants to seal
by the end of this year, some financial analysts say they could
slow down negotiations or put pressure on the Italian-American car
maker to adjust the terms of the deal.
Italy's Fiat acquired Chrysler in stages after the U.S. company
declared bankruptcy in 2009. In the final step in 2014, Fiat bought
the 41% of Chrysler that it didn't already own for $4.4 billion
from a trust of the United Auto Workers union. That transaction
valued all of Chrysler at about $10.6 billion.
Italy's tax authority maintains that, at the time Fiat Chrysler
moved its headquarters, the company understated the value of
Chrysler by about EUR5 billion, according to a person close to the
company. The tax authority declined to comment. Bloomberg first
reported the potential amount of Fiat Chrysler's tax bill.
In documents filed for its third-quarter results on Oct. 31,
Fiat Chrysler said Italian authorities began their tax audit in
2017, and on Oct. 22 of this year sent a report to the company.
From that date, the two sides have 60 days to negotiate.
"We cannot predict whether any settlement may be reached or if
no settlement is reached, the outcome of any litigation," Fiat
Chrysler wrote in October. "As such, we are unable to reliably
evaluate the likelihood that a loss will be incurred or estimate a
range of possible loss."
GM sued Fiat Chrysler in the U.S. last month, accusing Sergio
Marchionne, Fiat Chrysler's longtime chief executive who died last
year, of authorizing bribes to UAW officials to reach an agreement
to reduce labor costs and gain an advantage over GM. Fiat Chrysler
has denied GM's allegations and called the lawsuit meritless.
The suit is connected to a long-running federal probe into
corruption at Fiat Chrysler involving labor-relations executives
and UAW officials. The company has said that the wrongdoing under
investigation involved a small group of individuals acting in their
personal interests.
UAW has said the bargaining process wasn't corrupted, but is
instituting reforms to combat corruption.
Write to Eric Sylvers at eric.sylvers@wsj.com
(END) Dow Jones Newswires
December 05, 2019 09:47 ET (14:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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