GM: 'Substantial doubt' about survival

[xav]

Automaker pummeled by weakening demand and mounting losses discloses that its auditors have raised serious questions about its future.

NEW YORK (CNNMoney.com) -- General Motors Corp. said in a government filing Thursday that its accounting firm has found there is "substantial doubt" about the automaker's ability to survive.

The embattled automaker made the disclosure in a 480-page filing with the Securities & Exchange Commission.

The filing's grim tone is not a surprise. GM has sustained large and continuing losses that have now reached $82 billion over the last four years. It had previously said it needed additional federal loans, coupled with improved sales, to remain in business.

GM said in a separate statement that it is confident it will be able to turn around the business if it gets the federal help it is seeking and when consumer demand for autos returns.

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

Still, Thursday's filing presents another hurdle the automaker will have to clear as it makes the case that it deserves additional taxpayer support going forward.

The Obama administration, under the terms of the $13.4 billion in federal loans GM has already received, must determine that the company's plans make it viable in the long run.

The government must determine that GM has a "positive net present value" or else demand repayment of the loans within 30 days - a development that would plunge the company into bankruptcy and quite possibly force it out of business.

The government has wide latitude in how it judges the company's net present value, based on assumptions it makes about future sales, car prices and costs for the company going forward. The administration clearly does not want to force the largest U.S. automaker into bankruptcy.

The GM filing disclosed that the Treasury already agreed to waive requirements that the automaker meet certain terms of the original loan agreement, including that it win agreement with creditors to convert two-thirds of its unsecured debt to equity by Feb. 17.

But even if the Obama administration continues to give support to GM (GM, Fortune 500) and rival Chrysler LLC, which has also received federal loans, Thursday's filing could create problems in its relations with suppliers and banks.For example, concerns about GM's future could cause companies that supply it with parts start to demand cash on delivery from the cash-starved automaker, according to GM's filing.

While parts makers would be reluctant to damage their largest customer with such a demand, they may have no choice because of GM's filing. Those parts makers' own auditors and banks could use the doubts raised by GM's auditors to raise questions about their own future.

Privately held Chrysler does not have to file a year-end financial statement with the SEC. Last week,Ford Motor (F, Fortune 500) said its auditors have not substantial doubt about its future. Ford went into this auto crisis with a much stronger cash position than GM or Chrysler.

GM said Thursday auto sales, which have plunged more than 40% in recent months, must rebound by next year if it is to survive.

Meantime, GM also said it needs additional federal loans to stay in business.

GM received $13.4 billion so far, and it has asked for up to $16.6 billion more. In addition, it is seeking $7.7 billion in loans to convert production from light trucks to more fuel efficient cars under an Energy Department loan program. And it is also seeking aid from foreign governments for some of its non-U.S. operations.

"The failure to obtain sufficient funding from the U.S. government or governments outside the United States may require us to shrink or terminate operations or seek reorganization for certain subsidiaries outside the United States," the filing said.

"If we fail to obtain sufficient funding for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief under the U.S. Bankruptcy Code," GM added.

GM's stock was down 16% in midday trading. To top of page
http://money.cnn.com/2009/03/05/news/companies/GM_10K/index.htm

Google news:
Canada's Flaherty worried by possible GM bankruptcy
GM auditors raise doubt on viability
GM Warns It May Fail Without Billions More in Aid
Ailing General Motors hints at bankruptcy
Auditors warn that GM may be finished
How Much Longer Can GM Hang On?
US open: General Motors frightens market again

All posted less than 2 hours ago.

It doesn't look good, Bloomberg tv is having a "breaking news" about it.

The beginning of the end for real this time?

[Roy Batty]

Instead of just bailing these giants out why dont we ask them to restart LAV III production (and other such projects)? We would pump needed money into the auto industry, re-equip the military and eventually save $ for taxpayers.

[CPLHUNTER]

All these bailouts need to end for all companies such as GM, Citibank, etc.

Free market economics go thru cycles of recession. It's during this time when the market culls the weak out of the flock and new businesses arise or existing ones that are failing and restructured.

Propping up failing companies w/ tax payer $ and money borrowed from China is not the solution

[CantGetRight]

Instead of just bailing these giants out why dont we ask them to restart LAV III production (and other such projects)? We would pump needed money into the auto industry, re-equip the military and eventually save $ for taxpayers.


you know I never thought of that

I can see how that would be of great benefit to GM, but how would the little contractor companies building them now feel

[Roy Batty]

The LAV II was built by GM here in Canada. It could be fired up in a couple of plants in the US and re-started in Oshawa Ontario.

[Skorzeny74]

Scary stuff the economy these days. The freaking stock market is tanking again today. Does anyone have any faith that the Government can make this better? I think the Stimulus bill will only worsen things.

[loganinkosovo]

The Big Automakers going bankrupt is a good thing.

Once bankruptcy is declared they can pitch out the unions and start making cars someone can afford again.

This is why Obomba, the wicked witch of the west and smelly harry have been doing everything in their power to keep the big three from declaring bankruptcy. This keeps the organized crime elements (unions), that donated so much money, in business.


Outsourcing? Look no further than the unions to see why it happened.

[Kaplanr]

So maybe we can reinstitute the mandatory 12 hour day and chuck out the child labor laws too. Your union tirade is a bit one-sided. The work rules need to be all but eliminated and the hourly wage reduced too, in line with non-union competition. Even then, it still leaves the question of what to do about the pension and health care obligations they so stupidly agreed to all those years ago. It's easy to say "screw-em", they'll have to get along like the rest of us now. Except the rest of us knew beforehand we weren't going to have paid for health care, so hopefully we saved or budgeted.

As for the bailouts, I happen to agree now. Unless someone can say the following ABCDE & F steps will "save" Citibank, GM or AIG, it's time to let them tank.

[Kilgor]

If they are not screwed now, they are going to be screwed by the pension liabilities .

[Kaplanr]

If they are not screwed now, they are going to be screwed by the pension liabilities .

So here's my question. Is it cheaper for the government to pick up GM's obligations instead of throwing cash at the black hole of Flint? Let's say we take the GM workforce as it is now and unilaterally abolish the pension and perpetual health care benefit for any worker under age 40. If you're under 40 you need to start planning and saving (IRA, 401K, etc.) like the rest of the work force. What's the cost to the Feds if they pick up that obligation from GM? We sweeten it by also garnishing GM's future profits for say 30 years - the time it will take for the retirees with the generous benefits to die off enough for GM to finish supoporting the obligation. I'm essentially saying that GM's labor obligations are its "toxic asset". The quality issues can be worked out.

[Violet Fashion by Mindy]

The Big Automakers going bankrupt is a good thing.

Once bankruptcy is declared they can pitch out the unions and start making cars someone can afford again.

This is why Obomba, the wicked witch of the west and smelly harry have been doing everything in their power to keep the big three from declaring bankruptcy. This keeps the organized crime elements (unions), that donated so much money, in business.


Outsourcing? Look no further than the unions to see why it happened.

Well thats just get rid of public holidays, paid annual leave, paid sick leave, workers compensation, work safety standards, minimum wage, standard 40 hour week, the list is endless.

All things the union movement battled with companies, government and in many countries died so not only it's members but society in general can have a better quality of life.

[Macs.]

All things the union movement battled with companies, government and in many countries died so not only it's members but society in general can have a better quality of life.

Yeah, but at some point alot of them went over with their demands and build up a flushy, unrealistic protection system that does not work in the real world.

[Nano]

GM is brain dead and it is on life support at the expense of someone else getting treatment in the bed(s) it is taking up. Everyone who were honest and had some financial/business knowledge understood that GM was in trouble for sometime. The car bailout is just pandering to the special interest and appeasement given the role our corrupt public officials have played in this economic blast zone. GM will get further government aid for years to payoff the union mob and then go bankrupt. It should have gone bankrupt as it should have been in a free economy.

[Nano]

Does anyone have any faith that the Government can make this better?

The government can do no good when it is in the hands of special interests and corrupt leaders. Regulations and laws are made to protect and enrich the interests groups and not necessarily to protect us.

[Flagg]

Well thats just get rid of public holidays, paid annual leave, paid sick leave, workers compensation, work safety standards, minimum wage, standard 40 hour week, the list is endless.

All things the union movement battled with companies, government and in many countries died so not only it's members but society in general can have a better quality of life.


Yes! Let us worship at the alter of Saint Jimmy Hoffa and thank our lucky stars for the unions and their bottomless pit of pure, pure selflessness.

They did it for ALL society.....NOT for themselves!

[Macs.]

They did it for ALL society.....NOT for themselves!

Yeah, and that's with alot of organisations that are the same kind as alot of Unions and Co.

At one point, they pick up "problems" and cases simply to stay alive. If you have a office that pays you to fix the inter****** problems of Giraffes, you gonna be pretty interested in keeping the inter****** problems of Giraffes alive.

[Flagg]

Yeah, and that's with alot of organisations that are the same kind as alot of Unions and Co.

At one point, they pick up "problems" and cases simply to stay alive. If you have a office that pays you to fix the inter****** problems of Giraffes, you gonna be pretty interested in keeping the inter****** problems of Giraffes alive.

Correctamundo!

unions = business

but business may not = unions

[sinophile]

So here's my question. Is it cheaper for the government to pick up GM's obligations instead of throwing cash at the black hole of Flint? What's the cost to the Feds if they pick up that [Pension] obligation from GM? We sweeten it by also garnishing GM's future profits for say 30 years - the time it will take for the retirees with the generous benefits to die off enough for GM to finish supoporting the obligation. I'm essentially saying that GM's labor obligations are its "toxic asset". The quality issues can be worked out.

GM faces an immediate cash flow problem that has little to do with pension obligations. With sales down perhaps 30% or more, mounting losses in its finance division and its cost of borrowing at impossibly high rates... pension obligations are a threat outside the scope of consideration.

Wether the USGOV bails them out, or they go BK the pension benefit guarantee corporation (quasi-us-governmental) will be on the hook for part of the pension bill. The balance will fall on the state and federal welfare systems.

Cynical consensus opinion is no bankruptcy due to political considerations.

[Flagg]

GM faces an immediate cash flow problem that has little to do with pension obligations. With sales down perhaps 30% or more, mounting losses in its finance division and its cost of borrowing at impossibly high rates... pension obligations are a threat outside the scope of consideration.

Wether the USGOV bails them out, or they go BK the pension benefit guarantee corporation (quasi-us-governmental) will be on the hook for part of the pension bill. The balance will fall on the state and federal welfare systems.

Cynical consensus opinion is no bankruptcy due to political considerations.

Some media have been reporting on the FDIC as banks fall........with the FDIC having to go to it's member banks for a top up in recent days.

Practically ZERO media have shined the light on the PBGC(already in the hole $10 billion before they even get started)......which is on the hook partially/fully with a boatload of WAY under-funded corporate pensions.

Combined with local/state pension hijinks we will see another substantial across the board leg down.

Everyone's complaining about the mortgage fraud......NO ONE is talking about local/state/corporate actuarial "new math" that "fixed" lethal underfunding of pensions by simply using impossible to attain investment return % models.

I believe New York fired their pension actuaries until the numbers got "better".

Pensions are going to be one of the biggest nails in the coffin of this "process" by the time the dust settles.

[sinophile]

Some media have been reporting on the FDIC as banks fall........with the FDIC having to go to it's member banks for a top up in recent days.

Practically ZERO media have shined the light on the PBGC(already in the hole $10 billion before they even get started)......which is on the hook partially/fully with a boatload of WAY under-funded corporate pensions.

Combined with local/state pension hijinks we will see another substantial across the board leg down.

Everyone's complaining about the mortgage fraud......NO ONE is talking about local/state/corporate actuarial "new math" that "fixed" lethal underfunding of pensions by simply using impossible to attain investment return % models.

I believe New York fired their pension actuaries until the numbers got "better".

Pensions are going to be one of the biggest nails in the coffin of this "process" by the time the dust settles.

And to that you can add:

- State and municipal budget shortfalls in the double digits.
- Authority defects (ie. Tenn. Valley Authority) in the billions.
- Alt-A mortgage market losses still to come.

Then consider the institutions (ie. banks, pension funds, insurance companies) who hold GM preferred stock and bonds. Or, Citi bonds and stock. Nationalization or bankruptcy decimates their portfolios leading to another cascade of losses.

This could all turn around if the USGOV would allow the markets to work with only mild intervention.

[Andreas]

Go go go go go.... I have 42K USD riding on GM and several other US blue Chips failing... whoohoo!!!

[sinophile]

From here (http://feedproxy.google.com/~r/clusterstock/~3/unK81fKNZFM/henry-blodget-general-motors-ready-to-throw-in-towel-2009-3):

General Motors Ready To Throw In Towel
by Henry Blodget
General Motors (GM) is finally ready to accept the inevitable:

WSJ: Top General Motors Corp. executives are more open to a speedy bankruptcy reorganization financed by the government, pushing aside earlier concern that such a move would scare away so many customers the company wouldn't survive, said a person familiar with the matter.

While the company still wants to avoid bankruptcy, the new view represents a reversal from GM's position late last year, when it sought a federal bailout. The change in thinking, combined with the disclosure Thursday that GM's auditor has raised "substantial doubt" about the car maker's ability to keep going, appears to move GM closer to the possibility it will file for reorganization.

This leak is likely in part a negotiating ploy designed to force bondholders into making concessions. But it's also finally an acknowledgement of reality. The company is also now finally acknowledging that bankruptcy won't make much of a difference to car sales.

[A]fter months of research, including analysis done by top bankruptcy advisers, the company has come to believe it could emerge from what is known as a prepackaged bankruptcy, said the person familiar with the matter.

Under a prepackaged bankruptcy, the various constituents -- unions, suppliers, bondholders -- would agree in advance to concessions. Prepackaged bankruptcies typically take just a few months to accomplish.

A bankruptcy of any sort could be far more effective than the type of out-of-court restructuring GM is undergoing. For instance, the company's entire debt load could be reworked, rather than a majority of it as it currently is trying to do, and the auto maker could circumvent state franchise laws that have long protected its dealers from GM's restructuring knife.

Under a prepackaged bankruptcy, said the person familiar with the matter, "We'd have 60 days of havoc and chaos, but the view is, if it was supported by the government and supported by the constituents, included the bondholders, the VEBA [retiree health-care trust] was negotiated, labor was in, that...we would be able to manage it."

Read the whole WSJ article here >

Wonder if the $8 billion (?) taxpayers have already thrown down the drain can be saved.

[Expert Marksman 126]

I agree with letting GM fail on principle, but people here are hurting bad right now. My friends family might even lose thier house. If they go under Detroit will be a ghost town.

[Violet Fashion by Mindy]

Yes! Let us worship at the alter of Saint Jimmy Hoffa and thank our lucky stars for the unions and their bottomless pit of pure, pure selflessness.

They did it for ALL society.....NOT for themselves!

Are you suggesting we rely on the good will of employers to continue providing all the benefits, wages and conditions that are now law (thanks to union efforts) if unions or the legislative requirements are removed?

The recent Australian history with work choices proves that employers can not be trusted to "be fair and reasonable". A government lost an election over this very issue. I guess the majority of the Australian population are dumb or something.

Some unions I agree can go to far at times. However the alternative is unthinkable.

And your example of Hoffa and the organised criminal elements of the American union movement do not ring true for the vast majority of unions across the globe.

[Zoomie]

Are you suggesting we rely on the good will of employers to continue providing all the benefits, wages and conditions that are now law (thanks to union efforts) if unions or the legislative requirements are removed?

The recent Australian history with work choices proves that employers can not be trusted to "be fair and reasonable". A government lost an election over this very issue. I guess the majority of the Australian population are dumb or something.

Some unions I agree can go to far at times. However the alternative is unthinkable.

And your example of Hoffa and the organised criminal elements of the American union movement do not ring true for the vast majority of unions across the globe.
Minardiau- You live in the past, not to mention another country and hemisphere, so you're totally out of touch with what's going on here, and have no clue. All of the auto unions are too big and bloated to do any good, and really no longer needed. Would you care to explain why the autoworker unions need a multi-million dollar golf course, that has continuously not made a profit since it opened? In fact, it's over $30mil in debt.

[ren0312]

Minardiau- You live in the past, not to mention another country and hemisphere, so you're totally out of touch with what's going on here, and have no clue. All of the auto unions are too big and bloated to do any good, and really no longer needed. Would you care to explain why the autoworker unions need a multi-million dollar golf course, that has continuously not made a profit since it opened? In fact, it's over $30mil in debt.

From long term strategic point of view, having a domestic auto industry, or anything related to the production of war materiel is very valuable in maintaining a viable military industrial complex, if you look at World War 2, a vast majority of the US production of tanks came from factories which formerly produced automobiles.

[Zoomie]

From long term strategic point of view, having a domestic auto industry, or anything related to the production of war materiel is very valuable in maintaining a viable military industrial complex, if you look at World War 2, a vast majority of the US production of tanks came from factories which formerly produced automobiles.
So, for that reason, we should piss away billions upon billions more of my money? I think not. What about having a strong economy. Does that not help, too?
Let the auto companies die, if they want to survive badly enough, they'll find a way to remain afloat.

[ren0312]

So, for that reason, we should piss away billions upon billions more of my money? I think not. What about having a strong economy. Does that not help, too?
Let the auto companies die, if they want to survive badly enough, they'll find a way to remain afloat.

From a long term view yes, unless you could invent a way to deploy a prefabricated tank factory, steel mill, ship yard etc., and I do not think it is a wise idea to dismiss the possiblity that the US will not find itself in a position where the entire economy is geared towrds war production.

[Sufficient]

Yeah, but at some point alot of them went over with their demands and build up a flushy, unrealistic protection system that does not work in the real world.

That is true.

Atleast here in Sweden its common knowledge that the unions offer fantastic protection for people with jobs, while at the same time creating a hell for all those without jobs. Unemployment is at 8-9 percent (that according to official statistics, its much higher in reality). The unions rather see great benefits and high wages for those that work than have all people working with lower wages. They don't care what is best for the society as a whole.

And what's worse is that the unions protect old inefficient workers that should have been replaced twenty years ago. There's a lot of gifted people with fresh educations and motivation to work hard that simply can not get a job, because the unions (and socialist politicians that have created special laws) won't let them. And after having being unemployed a year or two their motivation to work at all is blown away.

As for Saab they are under a six month bankruptcy protection now, and if they can't get their crap together the company will be history. They did receive some money from GM to pay their most immediate bills, but it's not enough. The Swedish government is not willing to bail them out either since they can't show that they will ever be able to make a profit. I'd say that the Swedish unions are partly to blame. Sure the cars are ****ty, but had they been cheap people would have bought them anyway. Now they are too pricy while just being Opels with makeup. High manufacturing costs because of inefficient workers and high wages do of course play an important role.

Just saw an ad for a Dacia Sandero that sells for 70,000 SEK here (6,000 Euro or 7,600 USD). You get five of those for a new Saab. Nuff said.

http://img24.imageshack.us/img24/272/daciasandero2009800x600.jpg
Dacia Sandero. Cute :)

[Mr Gently Benevolent]

And what's worse is that the unions protect old inefficient workers that should have been replaced twenty years ago. There's a lot of gifted people with fresh educations and motivation to work hard that simply can not get a job, because the unions (and socialist politicians that have created special laws) won't let them.I must admit I would rather retain wisdom than employ motivation.

[Sufficient]

I must admit I would rather retain wisdom than employ motivation.

What wisdom is needed when building cars? Simple work at the assembly line doesn't require fifteen years of expertise.

[Mr Gently Benevolent]

What wisdom is needed when building cars? Simple work at the assembly line doesn't require fifteen years of expertise.Nor a "fresh education" your pretty much advocating chucking one group of people into unemployment and taking others of it, at the end of the day the unemployment figures stay the same.

[Sufficient]

Nor a "fresh education" your pretty much advocating chucking one group of people into unemployment and taking others of it, at the end of the day the unemployment figures stay the same.

Not sure about that. Higher efficiency among workers obviously reduce the cost of the finished product. I have had three factory jobs in my life involving manual assembly work, and I don't think its a coicidence that the old grannies didn't stress too much in either of the companies.

In Sweden the unions make sure its more or less impossible to get rid of the inefficient grannies. There is also a special law that requires the companies to get rid of employees after a "first one in, last one out" principle. So if a company reduces their workforce with 25 percent its the young efficient workers with less years in the company that gets sacked and the dinosaurs stay.

With lower prices the company wll most likely sell more of their products, and can in turn use the investment opportunities to hire even more workers. Even though Volvos and Saabs have been in the top of the sales list in Sweden the recent years, its not exactly factory workers that can afford to buy them. Most of them are bought as company cars. The cheaper cars (made outside Sweden that is) in the top ten list on the other hand, are usually privately purchased.