Auditors raise doubts about GM’s survival

March 5, 2009

(ChattahBox) — General Motors Corp on Thursday said its auditors had raised “substantial doubt” about its ability to survive outside bankruptcy if it fails to stem its losses and stop burning cash. Auditors for Deloitte & Touche wrote in their annual report:

“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.”


The “going concern” warning from the struggling U.S. automaker had been expected, but underscored the stakes for GM as it seeks more U.S. government aid to restructure outside a court-supervised bankruptcy process.

Shares in already severly beaten-up General Motors stock fell almost 15% in early New York trading.

Last week GM posted a $30.9bn loss for 2008 and warned that 2009 was set to be “challenging”.

The firm, which plans to cut 47,000 jobs also said it might need another $22.6bn in government loans to survive.

It has already received $13.4bn in federal loans as it struggles in what analysts say is the worst vehicle sales market in 27 years.

GM said that its creditors had decided not to force the company to repay more than $6bn in loans following the auditor’s warning, in order to let GM press the case for more government financial aid.

GM reiterated on Thursday that a bankruptcy filing could lead to liquidation, as the company would not have enough funds to finance its reorganisation.

Besides, consumers could be reluctant to buy bankrupt carmakers’ vehicles, GM, said.


Comments

One Response to “Auditors raise doubts about GM’s survival”

  1. vs on March 5th, 2009 1:00 pm

    THE PROBLEM … Credit Default Swaps/ Credit Default Obligations doesn’t know what the underlying collateral is … therein lies the problem … no one really knows what the worth is … it is just the purchase of a “bond”, of a “bond”, of a “bond” … recreated and traded without recognition of the underlying value of the collateral. I wish we could do this … create multiple bonds on my home without consideration of the underlying value of the home … and when it collapses argue “it was the market”, meanwhile walking with 5-6 times cash to the “loan value” of the collateral … so there are 55 trillion of CDO’s so the market will need to deflate some more … until someone starts counting in earnst, to revive confidence, the market will continue its downward spiral. How can it do otherwise? Of course our govt can purchase most anything, but what about the value of creating more money only to watch it purchase worthless paper. Another way to think about it … this market began turning upward about 1985 with the housing boom … and so it will return to this level. In the meantime, alot of money will be laundered by a few of the very rich.

    Where is Merrill?
    Where is Lehman?
    Where are all the other stock market makers?

    Best get out now of “lyin’, thievin’ stock market” as it is there is no such thing as a believable income statement or balance sheet … and return to the reconstituted market after it flushes out. Cash is king. Reducing debt will earn more than the market for the next few years … unless you have inside trader info. Sorry for living in reality. 🙂

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