Taxpayers help Holden motor on

[Wretched]

TAXPAYERS contributed at least $100 million in pre-tax revenue to Holden's $112 million net profit for 2010, its first profit in six years, according to accounts the manufacturer declined to show The Age.

GM Holden's 2010 accounts - obtained through the Australian Securities and Investments Commission - show taxpayers subsidised the car maker to the tune of $99.6 million through the Automotive Competitiveness and Investment Scheme.

This was in addition to the 2010 portion of the $500 million Green Car Innovation Fund (now cancelled) awarded to Holden - $149 million in total over three years, spread over various capital and engineering project ledgers.
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The South Australian taxpayer lent the company $3 million.

The 2010 accounts also show the car maker is in dispute with the Australian Taxation Office over $176 million in disallowed deductions and revised assessments.

All of which is a less rosy picture than Holden pitched on the release of its financial results two weeks ago. Holden yesterday defended its position.

''We've been pretty circumspect in the way we've been speaking about our results,'' Holden's director of external communications Emily Perry said. ''We've said there are still a lot of challenges for us and our industry. We were assisted with government funding, and last financial year by foreign exchange gain, so I think we've been quite clear about that,'' she said.

The taxpayer subsidies helped bolster Holden's pre-tax profit to $136.8 million ($112.4 million after tax). Had the company not received the ACIS grants and made foreign exchange gains, it would have finished in the red. Taking away the grants, foreign exchange gains and sundry revenue ($158.7 million combined) flips Holden's $136.8 million pre-tax profit into a $21.9 million pre-tax loss.

Subtracting the federal taxpayers' grant alone shrinks Holden's pre-tax profit to $37.2 million.

''There isn't a car industry anywhere in the world that doesn't rely on some degree of private-public partnership,'' Ms Perry said.

''The funding we received as part of the Green Car Innovation Fund was critically important to justifying the investment we had to make to bring the Cruze to Australia.

''If you took that money out … [we would] not have been making the large investments we have made over the last couple of years,'' she said.

But what one arm of government gives, another is trying to claw back.

The Tax Office has disallowed $176 million in deductions over the period 2005 to 2008 for royalties GM Holden paid to a US-based GM company, GM Global Technologies Operations Corporation.

The Tax Office has issued amended assessments for these years based on the disallowances, which GM Holden disputes and has lodged formal objections to on the basis that the tax office's treatment amounts to double taxation - here and in the US.

''This part of the ATO's normal review process for a business our size. We're being audited as part of that, which is under way, and we can't say more than that,'' Ms Perry said.

Read more: http://www.theage.com.au/business/ta...#ixzz1KlmzbyY3

[aussie muscle]

Originally Posted by Wretched

GM Holden paid to a US-based GM company, GM Global Technologies Operations Corporation.

That's the biggest problem with all three "australian" makers, they are all not australian anyway.

[xr8man83]

i wonder how much ford aust got in grants?

[Joe5619]

That article really, really, really gives me the sh!Ts!!! As an accountant, you do NOT deduct grants (which is a capital investment) from the P&L results.. Trying to make this relationship is totally & completely wrong, wrong, wrong, wrong..

[Wretched]

Originally Posted by xr8man83

i wonder how much ford aust got in grants?

exactly
I wonder how similar to Holden does FoA work?

[mik]

the ATO usually does`nt stuff around if its owed money, it will be interesting to see where this goes.

[Luke Plaizier]

Toyota racked up a huge tax debt not that long ago too. I don't know how similar the circumstances were.

This seems to be a moral standpoint every is taking in Australia - that automotive shouldn't receive taxpayer funds. Is that a fair point? Or a case of too many people having a say?

Then again, everyone complained in the US that flights to the Moon shouldn't have consumed tax payer funds.


Lukeyson

[Polyal]

Originally Posted by xr8man83

i wonder how much ford aust got in grants?

Ill hold my tongue until thats known.

[Luke Plaizier]

Aren't all the previous grants public knowledge? They may not have all been GCIF grants, but didn't they get some assistance with the Foundry for brake rotors? And some for the Ecoboost/Diesel/LPi engine integration work? Or were they grants previous to this reporting period?

You speak coyley (or Coyote-like Mr Road Runner) as if there are some announcements pending.

And that makes me wonder - when will all base model Falcons be running around with Ford made 355mm 4 spot front rotors and calipers?


Lukeyson

[Polyal]

Originally Posted by Luke Plaizier

Aren't all the previous grants public knowledge? They may not have all been GCIF grants, but didn't they get some assistance with the Foundry for brake rotors? And some for the Ecoboost/Diesel/LPi engine integration work? Or were they grants previous to this reporting period?

You speak coyley (or Coyote-like Mr Road Runner) as if there are some announcements pending.

And that makes me wonder - when will all base model Falcons be running around with Ford made 355mm 4 spot front rotors and calipers?


Lukeyson

I was more concerned in how Ford defines them for claiming they are profiting.

[EgoFG]

Originally Posted by Joe5619

That article really, really, really gives me the sh!Ts!!! As an accountant, you do NOT deduct grants (which is a capital investment) from the P&L results.. Trying to make this relationship is totally & completely wrong, wrong, wrong, wrong..

That is not the impact that they are after. They are not trying to say that the accounting is wrong, rather, that the profit was at taxpayer expense.
It does this with some basic "what if" analysis.

Looking at it simply, GMH claims a 1.12 m profit, and yet they got 1m free money.
This is not a bullet proof argument - but then no "what-if" ever is (without an alternate universe)


This is the key point in the article

Had the company not received the ACIS grants and made foreign exchange gains, it would have finished in the red.

So there is no need to let this article tax your accountant's heart

[bobthebilda]

Originally Posted by Joe5619

That article really, really, really gives me the sh!Ts!!! As an accountant, you do NOT deduct grants (which is a capital investment) from the P&L results.. Trying to make this relationship is totally & completely wrong, wrong, wrong, wrong..

The articles point is - that without taxpayers forking over alot of money to maintain incompetant executives earning $200,000 to $800,000 a year and then them coming out and saying that they are so brilliant that they managed to make a $112 million profit, sort of flies in the face of all common sense.

The whole purpose of getting a grant like ATS or the green car fund, is to spend it in australia, on technology and processes that benefit the australian community. Not to pilfer it away, via some abstract company setup, back to head office, or to allow those incompetants to claim that they have somehow managed to make a profit.

SO once you get a grant, you put it into revenue on the profit and loss statement. If you dont spend it (sort of defeating the whole purpose of a grant), it stays on the books as "cash on hand", if you do spend it, it goes onto to the books as "assets". So it has everything to do with the Profit and Loss of a company.

The government is forking over millions each year so

The Tax Office has disallowed $176 million in deductions over the period 2005 to 2008 for royalties GM Holden paid to a US-based GM company, GM Global Technologies Operations Corporation

it can be sent to the US. Go figure!!

[Brazen]

grants are only payable if certain development and R&D goals are met. Usually the company has to spend X amount of dollars to get it, in the case of Green vehicle technology Holden puts up $3 for every $1 of support.

If they didnt get the support they probably wouldnt have spent as much on R&D and simply let other GM places around the world to do the research. This would have lowered Holdens expenditure dramatically - so its a stupid article as you cant just remove $100,000,000 of government grants from the P&L without also removing $300,000,000 of Holden's expenditure.

[XRtowcar]

All three Australian car-makers – Holden, Ford and Toyota – have been on the receiving end of the scheme that kicked off at the height of the GFC in 2009 with a total budget of $1.3 billion as part of the over-arching $6.2 billion New Car Plan for a Green Future.

GM Holden received $150 million towards local production of the four-cylinder Cruze that has just begun at its Elizabeth plant in South Australia in readiness for launch in a few weeks.

Ford Australia got $42 million towards the cost of engineering its new-generation EcoBoost four-cylinder engine into its Falcon – a model that is set to arrive in showrooms later this year.

Toyota Australia was given $63 million towards its $300 million program to retool its Altona engine plant in Victoria for a new four-cylinder 2.5-litre engine for its 2011 Camry and Camry Hybrid.

http://www.goauto.com.au/mellor/mell...2578260018E484

[castellan]

Does the gov give the money ?
Don't the gov get that money back ?
Is it in aussies interest to do as so.

Our gov give ! tax payer dollars to other countries all the time but now this money is going back into our own country's interest is it not.

I think a new model car takes maybe 3 years until they make a profit then the new model needs investment and so it goes. so it all works over some years and you can not just look at it over one year.

If the aussie car companies were to fail i think it would cost aussie nation a lot more.

[Joe5619]

Originally Posted by bobthebilda

SO once you get a grant, you put it into revenue on the profit and loss statement. If you dont spend it (sort of defeating the whole purpose of a grant), it stays on the books as "cash on hand", if you do spend it, it goes onto to the books as "assets". So it has everything to do with the Profit and Loss of a company.

You can spin all the BS you want, but you have made some very very basic accounting errors here that show you have no idea.

Cash on hand & assets do NOT get put into P&L statements.. Please stop talking as you clearly do not know what you are talking about here & in this case I do!!

[jpd80]

Originally Posted by bobthebilda

SO once you get a grant, you put it into revenue on the profit and loss statement. If you dont spend it (sort of defeating the whole purpose of a grant), it stays on the books as "cash on hand", if you do spend it, it goes onto to the books as "assets". So it has everything to do with the Profit and Loss of a company.

No, the grant has to be used on a project that has been approved by the government,
it cannot be just parked in cash at hand for later on, that is an accounting no no.

Joe5619, I see you beat me to it...

[vztrt]

Just remember these grants came along so the government would drop its tariffs and create a more competitive car industry. Seems a lot better for the consumer now then before.

[galaxy xr8]

You know the saying "Holden car's, meat pie's"

Soon it will be "Holden car's, Paul Hogan and the ATO,".

[HUNTER8]

Originally Posted by Joe5619

You can spin all the BS you want, but you have made some very very basic accounting errors here that show you have no idea.

Cash on hand & assets do NOT get put into P&L statements.. Please stop talking as you clearly do not know what you are talking about here & in this case I do!!

I think you've misread that Joe because he's not saying that at all. As an accountant Joe, how does any business show the receipt of a grant if not through the p & l statement? If your trying to say it doesn't show on the p & l then how do they also show that it's been spent?

[SEZ213]

I was always of the impression grants were a form of income, and therefore needed to be on the P&L, but only if the recipient has actually received them and there are no conditions, or else once the conditions have been met (spending the amount of money required, ie. Revenue recognition)...but, I could be wrong...

ergo GM/Holden have met the conditions, and they can now class this money as income, putting in on the P&L.