GM's future 'in doubt', say auditors

Car giant General Motors was warned its future is in “substantial doubt” by auditors, it emerged today.

The company said it may have to seek bankruptcy protection if it cannot execute a huge restructuring plan.

It revealed the concerns in an annual report filed with the US Securities and Exchange Commission.

“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,” auditors for the accounting firm Deloitte & Touche LLP wrote in the report.

GM has received $13.4bn (€10.7bn) in government loans as it tries to survive the worst auto sales climate in 27 years. It is seeking a total of $30bn (€23.9bn) from the government. During the past three years it has piled up $82bn (€65.4bn) in losses.

The company has until March 31 to sign agreements of concessions from creditors and the United Auto Workers union to show the government it can become viable again.

Last month it submitted a restructuring plan to the Treasury Department that includes laying off 47,000 workers worldwide by the end of the year and closing five more US factories.

GM said in its filing that its future depends on successfully executing the plan.

“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 US Bankruptcy Code,” the Detroit-based company said in the annual report.

GM, the report said, is highly dependent on car sales volume, which dropped rapidly last year. “There is no assurance that the global automobile market will recover or that it will not suffer a significant further downturn,” the company wrote.

GM has said it wants to avoid bankruptcy protection because it would scare off customers. Car buyers would be reluctant to buy from an company in bankruptcy protection due to fears that it would not be around long enough to honour warranties or make replacement parts.

GM, in its viability plan submitted to the Treasury last month, said it explored three bankruptcy scenarios.

Chief Operating Officer Fritz Henderson said at the time that the government would be the only place the company could get financing for bankruptcy reorganisation, because the credit markets are frozen.

GM warned last month that its auditors may raise the “going concern” doubts, and industry analysts said auditors’ statements may trigger clauses in some of GM’s loans, placing them in default.

But the company said in its filing that it has received waivers of the clauses for some of its immediate debts.

“Consequently, we are not in default of our covenants,” the report said. “If we conclude that there is substantial doubt about our ability to continue as a going concern for the year ending December 31, 2009, we will have to seek similar amendments or waivers at that time.”