Delphi: Eatin' American Tax Dollars, S**ttin' British Tax Pounds

Jack Baruth
by Jack Baruth

When Delphi emerged from a long, drawn-out bankruptcy in 2009, the Federal Government’s Pension Benefit Guaranty Corp assumed a six billion dollar liability in underfunded pension plans. As a consequence, many Delphi salaried employees have lost the majority of their pensions. But when Delphi Automotive incorporated after the bankruptcy, that incorporation took place in the United Kingdom.

Now the IRS is actively pursuing claims against Delphi for tax liabilities — but “new Delphi” would rather pay taxes to our former colonial masters.

According to the WSJ,

In 2011, as the new Delphi prepared to go public, it disclosed that the IRS was “currently reviewing” whether the anti-inversion rules applied to it. The company said that if the IRS didn’t carve out an exception in its impending rules, there would be a “significant risk” that Delphi’s inversion eventually would be set aside and the firm would be treated as a domestic corporation for U.S. tax purposes. When the regulations came out in February of 2014, no exception was carved out, lawyers say.

It is difficult to envision how anybody’s version of a “free market” involves a company shedding six billion dollars of liability to the United States Government before running off to the UK to incorporate for the purpose of saving tax money — even though Delphi’s primary operations continue to be in Michigan. Given the continuing and considerable legal activity by former Delphi salaried employees who strenuously object to taking seventy-percent haircuts on their pensions, perhaps the best thing to do would be to permit Delphi to continue to pay the UK taxes on its earnings, but to hand over that six-billion dollar liability to “new Delphi”.

Alternately, the IRS might determine, and the courts might agree, that the “inversion” is not permitted by law, forcing Delphi to remit several years’ worth of back taxes to the United States. No matter how it happens, however, something’s rotten in Denmark — or London, depending how you look at it.

Jack Baruth
Jack Baruth

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  • Cpthaddock Cpthaddock on Aug 11, 2014

    It's well known that corporations are people. Now it's time to let people be corporations. When that happens, by all measures of sanity the US health care system deserves to experience a similar exodus to the UK as the tax system.

  • Wmba Wmba on Aug 11, 2014

    The usual reason any company headquarters in the UK is due to their bankruptcy provisions. Takes about 5 minutes, and your employees are s**t out if luck. Particularly popular with "German" companies who otherwise have to hand over actual retirement packages (like GM when they closed the main Opel plant). A google search will find all sorts of "solicitors" expounding the benefits of relocating head offices to the UK, to save the owners from losing the money they made off their employees when times were good.

  • Glennbk First, Cadillac no longer has brand cache. And as such, the prices need to drop. Second, reliability. Cadillac doesn't have that either. Dedicate GM funds to re-design the High Value Engines. Third, interiors are too gimmicky. Take a step back and bring back more buttons and less black plasti-chrome. Forth, noise isolation. These are supposed to be luxury cars, but sound like a Malibu inside.
  • Dave M. Mitsubishi for many years built stout vehicles for whatever market they were in (specifically citing Mighty Max and Montero). In the '90s they became the LCD for high-risk borrowers; coupled on top of mediocre and stale product, interest in them waned. Aim for the niches (hybrids, small pickup, base CUVs). I find it interesting that they have a plug-in CUV based on/made by Nissan, but Nissan doesn't.
  • Glennbk Please Mitsubishi, no more rebranded Nissan products.
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  • Wolfwagen I dont know how good the Triton is but if they could get it over here around the $25K - $30K They would probably sell like hotcakes. Make a stripped down version for fleet sales would also help