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Lower US Corporate Tax Rate Will Benefit Foreign Carmakers More Than Ford, GM

Ford Motor Company isn’t about to see much of a boon to its bottom line from the new, lower corporate tax rate enacted under US President Donald Trump, while its foreign competitors are all expecting to see a sizable jump in post-tax profitability. Trump made supporting US companies and American-made products a central talking point during his 2016 presidential campaign, and expressed criticism toward some foreign automakers on a few occasions since taking office.

That the United States’ new nominal corporate tax rate of 21 percent (down from 35 percent before the tax bill was passed) is expected to help foreign automakers more than US companies like Ford is “very ironic, for sure,” Morningstar analyst David Whiston told Bloomberg. “There are always unintended consequences of government intervention and change.

“But long term, this is a positive for everybody because they’re going to save some cash taxes.”

The reason Ford – along with its crosstown rival General Motors – isn’t expecting to see much of a difference on its taxes paid to the US government is because American automakers accrued deferred tax assets last decade over years of posting losses, according to Bloomberg; under the new rate, those assets aren’t worth as much. Ford posted a record $12.7 billion in losses in 2006, for instance, allowing it to use those losses to lower its taxable income in subsequent quarters. Under the new tax law, Ford will still be able to do that with past losses, but it won’t save the automaker as much money now that the corporate rate has been lowered substantially.

Conversely, Honda is expecting a 346-billion-yen ($3.1 billion) profit boost in the US, while Toyota anticipates 290 billion yen ($2.6 billion), for the fiscal year ending in March. Daimler AG reported a boost of about a billion Euros ($1.2 billion) to its 2017 profits.

Aaron Brzozowski is a writer and motoring enthusiast from Detroit with an affinity for '80s German steel. He is not active on the Twitter these days, but you may send him a courier pigeon.

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