General Motors has warned it could fall into bankruptcy. The warning was included in an annual
report issued one month before the automaker hopes to win vital new funds from the
government.
In the report, GM’s own independent accounting firm mentions “substantial doubt” about the company’s ability to continue because of GM’s possible inability to generate enough cash to meet its obligations and sustain operations.
{mosads}“Our future is dependent on our ability to execute our Viability Plan successfully or otherwise address these matters,” the report states. “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.”
Sales volume will be a major factor in GM’s ability to survive, the report said. That’s a problem, since the global auto market is suffering through the worse sales period in decades. GM’s report states that vehicle sales in the U.S. have dropped 40 percent since their peak in 2007, while sales globally have fallen 23.5 percent since January 2008.
GM also states that its survival is dependent on winning additional loans from the U.S. and foreign governments. Under terms of its deal with the Treasury Department, GM must submit a report by the end of this month detailing its progress in implementing its viability plan.
If the company does not comply, the maturity of $13.4 billion in loans will accelerate. GM’s report states that the company does not “have means to repay or refinance the amounts that would be due and payable.” It said this could lead the company to seek relief through bankruptcy.
General Motors and Chrysler have requested more than $20 billion in additional loans from the government.
Ford has not asked for any government support, but has said that the failure of one of the other two companies could lead it to ask for help.
President Bush gave General Motors and Chrysler loans after the Senate rejected a bill that would have allowed the use of funds from the $700 billion bailout bill.