GM warns it may be forced into bankruptcy

[SlowHands]

GM faces an end of March deadline to complete concession talks with UAW and bondholders..

Kevin Krolicki - Reuters - March 05, 2009

How many times has GM given warnings already? As so goes GM, goes the country? -- Ed.

DETROIT - GM Thursday said its auditors had raised "substantial doubt" about its ability to survive outside bankruptcy if it fails to stem its losses and stop burning cash.

The "going concern" warning from the struggling U.S. automaker had been expected, but underscored the stakes for GM as it seeks up to $30 billion in U.S. government aid to restructure outside a court-supervised bankruptcy process.

GM's shares dropped 15 percent to $1.87 in early trading on the New York Stock Exchange as investors reacted to the news.

GM said its creditors had agreed to waive a requirement that could have allowed them to force the automaker to repay more than $6 billion in loans because of the warning in order to allow GM to press its case for government aid.

The automaker had warned late last month that it expected auditors Deloitte & Touche would question its viability after it reported a loss of nearly $31 billion for 2008.

The disclosures came in GM's delayed annual report to U.S. Securities Regulators and a 25-page discussion of the growing risks facing the automaker ranging from tight credit and troubled suppliers to slumping demand for new cars around the globe... [Read More]

[jimepting]

They are caught in a perfect storm. Putside Chapter 11, It's over for them!

[paratwa]

Originally Posted by jimepting

They are caught in a perfect storm. Putside Chapter 11, It's over for them!

I usually reserve the term "perfect storm" for multiple outside factors. In this case there's only one outside factor (the economy/credit crunch). The rest of the factors are, their own stupidity and greed.

We agree on the Chapter 11 bit though.

[Earthling]

The automaker also reiterated that a bankruptcy filing could force a liquidation because of the lack of financing its reorganization would require and consumer reluctance to buy vehicles from a bankrupt automaker.

If they file, they could be gone for good. Scary news, and the markets are down in response.

Harry

[brick]

What is this "forced" of which they speak? If that means "we mismanaged the company and then couldn't hack it when the road got bumpy", then sure. If that means "it's not our fault", then no. **** no.

[chilimac02]

I hope they have to restructure through Chapter 11. Maybe then they will be rid of the ridiculous promises they made to employees years ago of lifelong pay/benefits.

Maybe the government will learn a lesson from GM, pushing debts into the future only hampers future growth and adaptability.

[Earthling]

Originally Posted by brick

What is this "forced" of which they speak?

Forced liquidation, as opposed to bankruptcy with restructuring. Forced because they couldn't get financing to restructure.

I parted company with GM's products a very long time ago, after they shafted me with that Chevy Vega aluminum block engine that wore out in less than 70K miles. Still, it's an awfully big chunk of American manufacturing about to vanish, and that is sad.

Harry

[Mike78]

I feel bad for the people who held up their end of the bargain and are going to be shafted. Whether they asked for it or not, they were promised a pension and nice retirement. They provided an honest day's work week in week out for 30+ years, were told they would have a nice retirement with benefits, and now will likely have to go back to work in their 60s or 70s.

The other sad thing is, option #1, another bailout - the taxpayer pays. Option #2, the company folds with hundreds of thousands hitting the breadlines - the taxpayer pays.

Nobody can be happy with this outcome.

[Right Lane Cruiser]

Goodbye GM, hello Voltecs Ltm.

[KrazyDawg]

So what happens to the rest of the money invested in an already bankrupt company... flush down the drain again.