MILAN (Reuters) – Italian tax authorities believe that Fiat Chrysler Automobiles <FCAU> underestimated the value of its U.S. business by 5.1 billion euros following Fiat’s phased acquisition of Chrysler, according to a company filing and a source close to the matter.
The audit, which concerns transactions dating back to 2014, could result in FCA having to pay back taxes for $1.5 billion, the source added, confirming a report by Bloomberg.
FCA said in its third-quarter report that the tax authorities had issued to the company a final audit report in October this year “which, if confirmed in the final audit assessment, could result in a material proposed tax adjustment related to the October 12, 2014 merger of Fiat SpA into FCA NV.”
It said the issuance of a final audit report starts a 60-day negotiation period, which ends with the issuance of a final audit assessment expected to be received by the end of December 2019.
“The company believes that its tax position with respect to the merger is fully supported by both the facts and applicable tax law and will vigorously defend its position,” it said in the third-quarter report.
A spokesman for Italy’s tax agency declined to comment.
“At this time, we cannot predict whether any settlement may be reached or if no settlement is reached, the outcome of any litigation. As such, we are unable to reliably evaluate the likelihood that a loss will be incurred or estimate a range of possible loss,” Fiat said.
News of the tax probe comes at a delicate time for Fiat Chrysler, which is finalizing talks with PSA, the maker of Peugeot and Citroen, over a planned $50 billion merger to create the world’s fourth-largest automaker.
(Reporting by Silvia Aloisi in Milan; Editing by Anil D’Silva)
DETROIT (Reuters) – Fiat Chrysler Automobiles NV and the United Auto Workers (UAW) union on Saturday announced a tentative agreement for a four-year labor contract, a boost for the automaker as it works to merge with France’s Groupe PSA.
Italian-American Fiat Chrysler and PSA, the maker of Peugeot and Citroen, last month announced a planned $50 billion merger to create the world’s fourth-largest automaker.
The tentative agreement with Fiat Chrysler, which is subject to ratification by the union members, follows contracts that the UAW already concluded with Ford Motor Co and General Motors Co.
The deal with GM followed a 40-day strike in the United States that virtually shuttered GM’s North American operations and cost the automaker $3 billion.
The UAW on Saturday said the contract with Fiat Chrysler included a commitment from FCA to invest $9 billion, creating 7,900 new jobs over the course of the four-year contract. Of the $9 billion, $4.5 billion was announced earlier this year, to be invested in five plants and creating 6,500 jobs.
Detailed terms of the tentative agreement were not released, but they are expected to echo those under the new contracts with GM and Ford, as the UAW typically uses the first deal as a pattern for the others.
“FCA has been a great American success story thanks to the hard work of our members,” UAW acting President Rory Gamble said in a statement. “We have achieved substantial gains and job security provisions for the fastest growing auto company in the United States.”
Ratification is not a sure thing. Rank-and-file UAW members at FCA in 2015 rejected the first version of a contract. In addition, a lawsuit related to a federal corruption probe could also raise doubts among union members about the terms agreed.
The federal corruption led GM to file a racketeering lawsuit against FCA, alleging that its rival bribed union officials over many years to corrupt the bargaining process and gain advantages, costing GM billions of dollars. FCA has brushed off the lawsuit as groundless.
Under the UAW’s deal with GM, the automaker agreed to invest $9 billion in the United States, including $7.7 billion directly in its plants, and to create or retain 9,000 UAW jobs.
Ford’s contract included commitments to invest more than $6 billion in its U.S. plants and to create or retain more than 8,500 UAW jobs.
The deals with GM and Ford also created a pathway to full-time employment for temporary workers and left healthcare insurance coverage unchanged.
Both automakers also agreed to signing bonuses, with $9,000 for full-time Ford workers and $11,000 for workers at GM.
(Reporting by Nick Carey; Editing by Leslie Adler)
FILE PHOTO: FCA’s Manley and Elkann speaks at the North American International Auto Show in Detroit, Michigan
General Motors filed a racketeering lawsuit Wednesday against Fiat Chrysler.
GM accused its smaller rival of making bribes over many years to corrupt the bargaining process with the United Auto Workers.
GM said it will seek “substantial damages” as part of the remedy. Although it did not specify an amount, it said the bribes cost it billions of dollars.
In the lawsuit, America’s biggest automaker accused Fiat Chrysler, under the leadership of now deceased CEO Sergio Marchionne, of bribing UAW officials into allowing it to pay lower wages than GM, use more temporary workers than GM and employ more lower-paid second-tier workers than GM.
Fiat Chrysler said in a statement it is “astonished by this filing, both its content and its timing” and said it assumes the lawsuit was intended to disrupt the labor negotiations tied to merger talks between it and Peugeot owner PSA.
Union officials from the UAW fired back in a separate statement, saying the fact these issues can cause doubts about the contract is “regrettable” and it stands by the terms previously negotiated with Fiat Chrysler.
The UAW has been the focus of a spreading federal corruption probe that recently forced its president to seek a leave of absence.
The lawsuit comes at a precarious time for Fiat Chrysler, not only is it in aforementioned merger talks – it is also in the midst of negotiating a four-year contract with the UAW.
GM said the lawsuit has nothing to do with the merger or the union and is solely focused on Fiat Chrysler.
(Reuters) – Fiat Chrysler and Peugeot owner PSA are in talks to combine in a deal that could create a $50 billion (£38.88 billion) automaker, a source familiar with the matter said on Tuesday.
Fiat Chrysler shares rose sharply after news of the talks and ended up more than 7.5% in U.S. trading. The companies and the French government had no comment.
The Wall Street Journal first reported the discussions. PSA’s supervisory board was due to meet on Wednesday to discuss the potential merger, another source close to the matter said.
If a combination of Peugeot and Fiat Chrysler succeeded in overcoming political, financial and governance hurdles, the new enterprise would still face substantial challenges. Global automakers face the prospect of a slowdown in global demand coinciding with the most dramatic technology changes in a century.
Peugeot Chief Executive Carlos Tavares has predicted “ten years of chaos” for global automakers as regulators demand a switch to electric vehicles to reduce emissions linked to climate change.
Investors have speculated for several years that Fiat Chrysler was hunting for a merger partner, encouraged by the rhetoric of the company’s late chief executive, Sergio Marchionne.
In 2015, Marchionne outlined the case for consolidation of the auto industry and tried unsuccessfully to interest General Motors Co in a deal. Fiat Chrysler earlier this year broached a merger with French automaker Renault SA that ultimately collapsed.
Created when Fiat, under Marchionne’s leadership, bought control of Chrysler out of a U.S. government-backed bankruptcy in 2009, Fiat Chrysler has one of the global auto industry’s most profitable franchises in the Jeep sport utility vehicle brand and a money-spinning North American pickup and commercial van operation in Ram. Both would boost Peugeot, which does not sell vehicles in the U.S. market.
Peugeot and Fiat Chrysler could over time share engines and vehicle architectures, reducing capital spending and freeing up cash to invest in electric vehicles and emissions reduction technology required in Europe, China and other global markets.
Fiat Chrysler is under increasing pressure to invest in clean car technology. The company disclosed earlier this month that it faces a $79 million fine for falling short of U.S. fuel efficiency standards. Fiat Chrysler agreed to pay U.S. electric car maker Tesla Inc for credits to help it comply with European emissions standards until 2022.
Evercore analyst Arndt Ellinghorst in a note on Tuesday said a combination of Fiat Chrysler and Peugeot “should ignite more rational industry behavior around allocation of capital and this particular merger makes materially more sense than a potential FCA-Renault merger.”
Peugeot and Fiat Chrysler had discussed a combination earlier this year, before Fiat Chrysler proposed a $35 billion merger with Renault. At that time, Fiat Chrysler said a deal with Renault offered more advantages than a combination with Peugeot.
Fiat Chrysler Chairman John Elkann broke off talks with Renault in June after French government officials intervened and pushed for Renault first to resolve tensions with its Japanese alliance partner, Nissan Motor Co.
Following the collapse of the Renault merger plan, Fiat Chrysler CEO Mike Manley left the door open for talks with would-be partners. But he said the Italian-American automaker could go it alone despite mounting costs to develop electric vehicles and comply with tougher emissions rules in Europe, the United States and China.
Along with Jeep and Ram would come Fiat’s Italian operations, which have struggled in recent years. Fiat’s Mirafiori assembly complex in its home city of Turin has run below 50% capacity, with thousands of workers on temporary layoffs.
Overall, Fiat has 58,000 workers in Italy, where the government has long resisted mass lay-offs by large employers.
Peugeot’s Tavares dismissed the idea of a combination with Fiat Chrysler during a discussion with reporters at the Frankfurt auto show last month. “We don’t need it,” he said when asked whether he was still interested in a deal with Fiat Chrysler.
Tavares has moved aggressively to expand Peugeot, acquiring German auto brand Opel from General Motors Co for $2.6 billion in 2017. Since then, he has overseen a turnaround at Opel.
Fiat Chrysler already has a commercial vehicle partnership with Peugeot.
(Reporting by Dominic Roshan K.L. in Bengaluru; Editing by Maju Samuel, Richard Chang and Dan Grebler)
