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03-05-2009, 07:03 AM
http://online.wsj.com/article/SB123625134434838921.html
GM Auditors Raise Doubts on Auto Maker's Viability
By BHATTIPROLU MURTI
General Motors Corp.'s auditor said formally Thursday that there is substantial doubt the struggling auto maker can remain a going concern, putting an official stamp on the company's dire condition and forcing GM to seek waivers from lenders.
The comments came in GM's delayed annual report filed with the Securities and Exchange Commission. Auditor Deloitte & Touche cited GM's continuing losses from operations, its negative net worth and an inability to generate the cash needed to run its business.
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GM had signaled such a warning would be coming last week, when it reported a $30.9 billion loss for 2008. The company barely escaped a bankruptcy filing last year when it received emergency loans from the federal government and has warned it could still end up in Chapter 11 if more funds aren't forthcoming. To free up that money, GM must persuade the Treasury that it has a viable business if restructured.
"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,'' GM said. (See GM's 10-K filing.)
The formal going-concern warning, while in some ways an obvious comment about the state of a company long on the ropes, did have a real effect on GM's relationship with some of its creditors. Terms of the company's $4.5 billion revolving credit facility, a $1.5 billion U.S. term loan and a $125 million inventory financing facility allowed lenders to demand instant repayment if GM's auditors expressed doubts about its ability to remain a going concern. GM has obtained waivers from those creditors, but with the provision that the loans can be called if the Treasury doesn't approve GM's viability plan.
Such difficulties could spread to GM's supply chain, the auto maker warned.
"There is no assurance that the global automobile market will recover or that it will not suffer a significant further downturn," the company wrote.
Suppliers -- in part due to their exposure to companies like GM -- could see their auditors also raise doubts about their ability to remain going concerns, which could leave them in default on their credit facilities, GM said. Liquidity is tightening anyway for suppliers, and cash demands will rise in March, when they restart idled production capacity.
Suppliers could impose more stringent payment terms on GM, the auto maker warned. GM also said that expects to record a significant loss that could exceed $1 billion over the reorganization of Saab, its Swedish auto maker in bankruptcy protection.
In addition to plying the U.S. government for funds, GM is looking for help overseas, another complication in its efforts to remain viable. GM Europe Chief Executive Carl-Peter Forster presented the company's plan for restructuring its Opel unit to the German government Monday and said GM Europe needs 3.3 billion euros in aid across Europe.
On Thursday, however, German Finance Minister Peer Steinbrueck told Deutschlandfunk radio that GM still hasn't provided a plan that justifies government help for restructuring Opel. "What we have received so far is no basis for the government to make a decision," Steinbrueck told the radio.
GM shares, which have dropped 90% over the past 12 months, were lower in very light premarket trading.
—Andrea Thomas contributed to this article.
Write to Bhattiprolu Murti at bhattiprolu.murti@dowjones.com
Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit
GM Auditors Raise Doubts on Auto Maker's Viability
By BHATTIPROLU MURTI
General Motors Corp.'s auditor said formally Thursday that there is substantial doubt the struggling auto maker can remain a going concern, putting an official stamp on the company's dire condition and forcing GM to seek waivers from lenders.
The comments came in GM's delayed annual report filed with the Securities and Exchange Commission. Auditor Deloitte & Touche cited GM's continuing losses from operations, its negative net worth and an inability to generate the cash needed to run its business.
Related Autos News
* Ford Aims to Restructure Debt
* U.S. Weighs Car-Emissions Policy
* Moody's, S&P Cut Ford Credit Ratings
GM had signaled such a warning would be coming last week, when it reported a $30.9 billion loss for 2008. The company barely escaped a bankruptcy filing last year when it received emergency loans from the federal government and has warned it could still end up in Chapter 11 if more funds aren't forthcoming. To free up that money, GM must persuade the Treasury that it has a viable business if restructured.
"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,'' GM said. (See GM's 10-K filing.)
The formal going-concern warning, while in some ways an obvious comment about the state of a company long on the ropes, did have a real effect on GM's relationship with some of its creditors. Terms of the company's $4.5 billion revolving credit facility, a $1.5 billion U.S. term loan and a $125 million inventory financing facility allowed lenders to demand instant repayment if GM's auditors expressed doubts about its ability to remain a going concern. GM has obtained waivers from those creditors, but with the provision that the loans can be called if the Treasury doesn't approve GM's viability plan.
Such difficulties could spread to GM's supply chain, the auto maker warned.
"There is no assurance that the global automobile market will recover or that it will not suffer a significant further downturn," the company wrote.
Suppliers -- in part due to their exposure to companies like GM -- could see their auditors also raise doubts about their ability to remain going concerns, which could leave them in default on their credit facilities, GM said. Liquidity is tightening anyway for suppliers, and cash demands will rise in March, when they restart idled production capacity.
Suppliers could impose more stringent payment terms on GM, the auto maker warned. GM also said that expects to record a significant loss that could exceed $1 billion over the reorganization of Saab, its Swedish auto maker in bankruptcy protection.
In addition to plying the U.S. government for funds, GM is looking for help overseas, another complication in its efforts to remain viable. GM Europe Chief Executive Carl-Peter Forster presented the company's plan for restructuring its Opel unit to the German government Monday and said GM Europe needs 3.3 billion euros in aid across Europe.
On Thursday, however, German Finance Minister Peer Steinbrueck told Deutschlandfunk radio that GM still hasn't provided a plan that justifies government help for restructuring Opel. "What we have received so far is no basis for the government to make a decision," Steinbrueck told the radio.
GM shares, which have dropped 90% over the past 12 months, were lower in very light premarket trading.
—Andrea Thomas contributed to this article.
Write to Bhattiprolu Murti at bhattiprolu.murti@dowjones.com
Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit