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GM auditors: 'Substantial doubt' on future viability
- Gallery: GM at the Cleveland Auto Show
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DETROIT (AP) – General Motors Corp.'s auditors have raised "substantial doubt" about the troubled automaker's ability to continue operations, and the company said it may have to seek bankruptcy protection if it can't execute a huge restructuring plan.
The automaker revealed the concerns today in an annual report filed with the U.S. Securities and Exchange Commission.
"The corporation's recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern," auditors for the accounting firm Deloitte & Touche LLP wrote in the report.
In pre-market trading, GM shares fell 14 percent from Wednesday's close, to $1.90.
GM has received $13.4 billion in federal loans as it tries to survive the worst auto sales climate in 27 years. It is seeking a total of $30 billion from the government. During the past three years it has piled up $82 billion in losses, including $30.9 billion in 2008.
The company faces a March 31 deadline to have signed agreements of concessions from debtholders and the United Auto Workers union to show the government it can become viable again. On Feb. 17 it submitted the restructuring plan to the Treasury Department that includes laying off 47,000 workers worldwide by the end of the year and closing five more U.S. factories.
GM said in its filing that its future depends on successfully executing the plan.
"If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code," the Detroit-based automaker said in the annual report.
GM, the report said, is highly dependent on auto sales volume, which dropped rapidly last year. "There is no assurance that the global automobile market will recover or that it will not suffer a significant further downturn," the company wrote.
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Comments
The Obama administration has poured far too much money into GM with no tangible results. The only recourse is to allow GM to go into a reorganization in the bankruptcy court which will get rid of Wagoner and his rubber stamp board of directors. This will salvage the maximum amount of jobs and factories. Obama is now pouring good money after bad in trying to prop up a dead soldier. Looking to the UAW to save GM is silly; the UAW didn't get them into this position, Wagoner and Lutz did.
Robert - thats dead wrong. You think GM can turn around 3 months after getting a check from the gov't? GM debtholders are currently negotiating to flip bonds for equity. The UAW has given 2 rounds of concessions with Wagoner on the clock, and more will come. Their biggest mistake was keeping too many brands, which is more Roger Smith's fault than Wagoner. And Lutz actually worked to make GM cars nice again. A filing will crush GM...they can reorg without filing. And the UAW is just at fault as anybody. And UAW's power grab occurred in 60s and 70s when GM mgt gave in constantly to keep the plants running.
Chrysler should disappear - they have no plan for reorg and their R&D is nothing - they are a dead man walking. But this country needs a vibrant GM and Ford.
It's sad that it has come to this. I blame both management and the UAW. The union had ridiculous contracts and the company signed off on it so shame on both of them. GM' s recent past of designing boring cars has come full circle. I think their quality has improved drastically over the past 25 years and is as good as any car maker but there are people out there who bought a lemon in the past and will not give The General another chance. Let's get this show over with..file chapter 11 and try to reorganize and become profitable again.
You are correct at stating that Wagoner and Lutz allowed this to occur. However, the UAW still has to have there part of the responsibility as well....They are the ones responsible for building such crappy cars to begin with.
We are in the beginning stages of massive re-organizations in many manufacturing industries.
I see GM dropping Saturn, Pontiac, Hummer, Saab...then picking up Jeep when Chrysler goes under. Jeep will replace the Hummer line and give GM the broad appeal they need. Hummer is too big and costly for the market. Saturn is really Opel and is no loss as it is produced in Mexico. Opel remains solvent in Europe. Pontiac is just another brand name under Chevrolet and Buick. Saab already filed bkcy and I see no reason to keep it.
VINDYYAK - I think your right. I see Jeep going to either GM or Ford. I see the minivan plant and design going to GM or Ford (the one that doesnt get Jeep). And I see the full size Ram pickup line going to a foreign maker, most likely Nissan (their full size truck never caught on, Toyota has one, and Honda doesnt want a pickup). Those are the only assets Chrysler has worth saving. As for Saturn, I can see either Kia or a Chinese maker wanting it. It has a name, a dealer network, and Kia or someone would make niche small cars. I would want GM to shut down Saturn, and send $5k coupons to all Saturn owners to buy a GM car in the next 3 years. This way your not opening the door for a competitor to get bigger. Saab will get saved by the Swedish govt and will return to being a small nichy vehicle.
babs68,
You have no idea what your talking about. The uaw builds what management gives them. They can't help if its poor quality or a bad design.
GM should be the one to go, and Ford and Chrylser need to stay. Ford figured out how to avoid the GM financial problem and Chrysler isn't as deep in the hole as GM. GM has had crappy management for over 25 years and the union hasn't been much help (except in the last year) in getting this sick giant well. It's hard to tell who's mangement and who's union when you watch them beg for money from the gevernment on TV. Ron G. dresses pretty good for a hard-working UNION MAN. He probably hasn't hung a part on a car in 20 years - what does he know about working on the :line". GM wants money to stay alive but they are laying off their US workforce - who's getting zoomed here? Me and you - that's who. Maybe they should close their plants in Mexico, Russia, and China and build those products here and ship them overseas to be sold. I know that I just opened myself up to the import tariff debate but I have an answer for that too - you won't let us sell our products competitively in your country - your goods are not welcome here and neither are your citzens.
The mention of Roger Smith reminds me of the documentary about Flint, MI. Multply the decay in Flint by 4 and you'll have Y-town if GM fails to right the ship.
NilesResident- I'm sorry but your views are based on a different era. 1) Chrysler is in the hole alot deeper then most of us know. They are private and dont have to reveal how bad their hole in. 2) GM needs to be in China, Russia, Brazil, etc. Thats the name of the global game. Toyota, Honda, VW, etc, are global companies as well. They make cars locally for local consumers. Thats how its suppose to be done. Its lower transportation costs, better quality cars, etc., when you build local for local markets. 3) GM should have shut down plants and laid off ages ago. But management, the govt (and their lack of healthcare reform) and the union all wanted to delay the pain. Well its time to go to the doctors. This country needs to be smarter, and not worry about propping up workers for an uncompetitive business model. Lordstown is a GREAT example of the union working with the management to make the contract smarter. The Valley should be proud of the local UAW for being smarter than the national group. 4) So many times in the Valley I hear people complaining about jobs going overseas, but then rush to Walmart to buy everything. Those low prices happen because of the products coming from overseas. You cant have your argument cake and eat it too. And this country, MORE THAN ever, should open its door to immigrants. You want to solve the housing crisis? Bring more immigrants in to grow the economy. You want the Slavic Village in Cleveland to have occupied homes again? Bring in immigrants and give them a fighting chance to succeed in America, just like my grandparents had 80 years ago. Isolationism leads to wars.
How many cars would GM have to sell, just to pay back the government loans?