autoinsane

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Auditors hired by General Motors (GM) have expressed “going concern” about the company’s ability to survive without entering bankruptcy.  GM executives say the report “was not unexpected”.

The warning was raised on a concern over slumping US vehicle sales.  The auditors, Deloitte & Touche,  have “substantial doubt” GM will be able to recover financially if auto sales do not improve dramatically and quickly.  The automaker is currently seeking an additional $30-billion in US government aid.  GM hopes to use that capital to continue to operate past the sales downturn and to restructure the company without going into court-supervised bankruptcy. The company lost $31-billion last year alone and analysts expect the company to lose another $1-billion during the first quarter of this year.

GM is aggressively working to restructure it’s debt and cash flow.  Bond holders are working with the US autos task force to accept a debt-for-equity swap in an effort to reduce outstanding obligations. The company has also started heavy trimming of its workforce. The company is on a tight schedule.  March 31st is the deadline to complete talks with the UAW and bondholders.  General Motors is working to convince the autos task force and President Obama that it should get additional government loans.

The official statement from General Motors

Auditors are required to assess whether there is substantial doubt about an entity’s ability to continue as a going concern over the next year. Given GM’s public statements on our liquidity position dating back to the end of 2008 and more fully disclosed in our February 17 viability plan submission, the opinion rendered in our 10-K was not unexpected.

That opinion is dependent on a number of factors including our ability to execute our viability plan, compliance with our U.S. Treasury loans, volume recovery of the industry, and access to additional funding from the U.S. and certain other governments. Once global automotive sales recover and GM’s restructuring actions generate the anticipated savings and benefits, the company is expected to again be able to fund its own operating requirements.

The auditor’s opinion has no impact on the aggressive actions we are taking to restructure our business for long-term viability.

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