In the General Motors annual report, independent auditors expressed "substantial doubts" as to whether the US car giant would stay in business. GM last month asked the US Treasury for an additional 16.6 billion dollars in loans.
AFP - Auditors for General Motors have voiced "substantial doubt" about the struggling automaker's ability to stay afloat in the company's annual report released Thursday.
The independent auditors concluded that GM's "recurring losses from operations, stockholders' deficit and inability to generate sufficient cash flow to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern," GM said in the report filed with securities regulators.
A week ago General Motors warned of a "challenging" year ahead as it posted a 30.9-billion-dollar 2008 loss, bringing the tally from four consecutive years of bleeding balance sheets to a whopping 86.6 billion dollars.
GM last month asked the US Treasury for an additional 16.6 billion dollars in emergency loans on top of the 13.4 billion dollars approved in December and said it would need another six billion from the governments of Canada, Germany, Britain, Sweden, and Thailand.
GM warned that it "could potentially be required to seek relief through a filing under the US Bankruptcy Code, either through a prepackaged plan of reorganization or under an alternative plan, which could include liquidation" if it is not able to obtain those loans.
Other substantial risks to GM's survival include an inability to restructure its debt by June 1, a further collapse in global auto sales amid the deepening recession, the potential failure of key suppliers amid a collapse in auto sales and the success of GM's restructuring plan.
GM warned that its former parts subsidiary, Delphi," is unlikely to emerge from bankruptcy in the near-term without government support and possibly may not emerge at all."
If that were to happen, GM said it may have to acquire some of Delphi's plants in order to ensure supply of critical parts or else it may be forced to pay higher prices to another supplier.
GM also noted the fragile state of its partially-owned financial arm, GMAC, on which it is heavily dependent to finance loans for customers.
GMAC's residential mortgage unit is of particular concern, GM said, noting that the housing crisis and credit crunch has "adversely affected ResCap's business, liquidity and its capital position and has raised substantial doubt about ResCap's ability to continue as a going concern."
GM warned that its stock, which closed Wednesday at 2.20 a share, could be delisted from the New York Stock Exchange if it sinks below a dollar a share for more than 30 consecutive trading days.
It could also be deemed a "penny stock" if it remains below five dollars a share, which would increase trading costs and potentially reduce the stock's liquidity.
Date created : 2009-03-05