GM may be forced into bankruptcy!
Thu Mar 5, 2009 10:44am EST
Found this article on Yahoo morning. The question is. What will happen if GM does file for BK?
General Motors Corp on 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.
GM has about $1 billion in convertible debentures that mature on June 1. Absent a deal to restructure its debt, that looming payment could force GM into bankruptcy, it said.
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.
GM faces an end of March deadline to complete concession talks with the United Auto Workers and bondholders to reduce its debt load as part of a bid to convince the autos task force assembled by U.S. President Barack Obama that it can be made viable with a new round of government help.
“Our future is dependent on our ability to execute our viability plan,” GM said in its annual report filed with U.S. securities regulators.
“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,” it said.
Some analysts have said that the “going concern” warning from GM’s auditors could risk cutting the credit available to its suppliers just as many of those smaller companies face a deepening cash crisis of their own.
For more info visit http://news.yahoo.com/s/nm/20090305/bs_nm/us_gm
Charles Butler
MCS
