GM Warns It May Fail Without Billions More in Aid
The Detroit automaker says that its viability is in "substantial doubt" unless it gets more cash
Even after borrowing $13.4 billion from the federal government, auto giant General Motors revealed today in its annual report that the auto giant's viability is in "substantial doubt" unless it can secure more funds.
"Our recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern," auditors wrote in the filing.
Although this means that GM may have to file for bankruptcy unless it enacts an enormous restructuring plan, the company said that it has no immediate plans to apply for protection.
One lifeline that could stave off bankruptcy, GM said, is further aid—at least $9.1 billion more simply to survive. In total, GM is aiming for $30 billion in federal funds to dig itself out of the hole. It's also looking for up to an additional $6 billion from foreign governments, several of which GM has been courting. Canada, for one, has said it might provide assistance.
To be considered for more funding from the U.S. government, GM has until March 31 to prove that it can become viable again. If it can't, the government not only could refuse further loans to the company but has the right to request that GM immediately repay its outstanding loans.
Last year, GM lost $30.9 billion as vehicle sales dropped 40 percent in the United States since their 2007 peak. In efforts to stave off bankruptcy, the company has cut Saturn, Saab, and Hummer from its eight brands, slashed 10,000 jobs, and made plans to close 14 of 47 manufacturing plants in the next three years.
Today's report is a reminder, however, that if more drastic changes aren't made—or additional aid is provided—those efforts could be unsuccessful.
Reader Comments
GM
So GM needs additional capital to keep its factories running. We cant aford to loose them as a manufacturer and employer. No solution is easy. But it has to be fair to the american taxpayer. 1 - Canada and Mexico need to bail out their own factories. 2 - UAW employees and retirees need to take a significant paycut, eliminate the job bank and rules, unemployment benefits just like the rest of us, not gauranteed income. Health insurance reduced for existing employees and eliminated for retirees. No pension etc until age 65 like the rest of us. The best jobs if you have a job are the Post Office, Teachers, and UAW workers. If labor contracts were competitive there would be more union labor. They are not and it has created a non-union advantage. Pay a fair wage not an entitlement.
Bankruptcy will actually make me more likely to buy a GM car
Who does GM think they are kidding when they say bankruptcy would hurt sales because no one know the future of GM or the value of a GM car warranty. How stupid do they think we are. Right now, no one knows what will happen to GM. At least with bankruptcy, we know for sure they will survive and get bondholders and labor and everyone else to back off because a bankruptcy judge will have the power to cram down anything holding them back. What everyone wants is a “New GM,” and bankruptcy does just that. In addition, how hard would it be for the feds to insure that in case of total meltdown that the feds will stand behind private warranties. There is a big private warranty business in the US that can ensure confidence. The only way to remake GM is bankruptcy, so the longer we wit, the more time and money we waste for no reason. The unions, bondholders and others are just going to be looking out for “me first” unless a bankruptcy judge is there to day what is what.
Whoa, need a perspective people
Sub prime lending and asset back securities took out the entire world. Toyota is asking for money from Japan so clearly no one is immune. Didn't Toyota make the cars people want to buy?
This isn't about the cars we make or what people want. People wanted our cars when they had money. This is a result of the financial disaster.
Honestly, GM, Ford, all make very efficient vehicles. They also make inefficient ones. People chose to buy what they did so if you think they sold too many inefficient ones it's only because they were building what people wanted. Anyway, lets put that to bed.
More bad press GM does NOT deserve: Electric cars were not killed, they were still born. Billions of research public and private and batteries are still a long way off from being ready to take the reins from engines. They are closer but not ready. Therefore it does not stand to reason that an electric car in 1996 could have been viable. In fact, GM lost millions on the EV1. I thought we wanted them to viable... right? Can't build money losing electric vehicles and be viable in this climate.
Anyway, they are asking for loans they can't get from the financial sector, which should be doing this, but can't and caused the whole mess in the first place. They should get these loans. As mentioned, at least automakers put people to work. Financial industries have comparatively few employees vs. the capital they process but got billions. If our government has to put money somewhere to help the ordinary person, automakers are a great place to start.
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