GM auditors raise the specter of Chapter 11

GM, which lost $30.9 billion in 2008, is operating with $13.4 billion in federal loans.

DETROIT (MCT, Detroit Free Press) - As previously warned, General Motors Corp. on Thursday announced that its independent auditors have raised doubts about the automaker's ability to continue its business, saying the company could be forced to file for bankruptcy without additional government help and success in restructuring the company.

GM said that its independent auditors from Deloitte & Touche LLC have raised "substantial doubt about our ability to continue as a going concern," GM said in its annual report filed with the U.S. Securities and Exchange Commission.

GM, which lost $30.9 billion in 2008, is operating with $13.4 billion in federal loans. The company is also seeking more than $16.6 billion in additional assistance from the U.S. government and foreign governments.

The automaker has announced plans to cut 47,000 jobs this year, close 14 U.S. plants by 2012 and scale back on brands and models.

The company faces a March 31 deadline to have negotiated deals to restructure its debt with bondholders and the UAW.

"Our future is dependent on our ability to execute our viability plan successfully or otherwise address these matters," GM said. "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."

GM first cautioned last week, when it announced its 2008 financial results, that its annual report could have a "going concern" opinion from its auditors.

In the report Thursday, GM said: "Our independent public accounting firm has issued an opinion on our consolidated financial statements that states that the consolidated financial statements were prepared assuming we will continue as a going concern and further states that 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."

Harlan Platt, a professor at Northeastern University in Boston who teaches about corporate turnarounds, said the auditors' concerns don't mean GM is headed for a bankruptcy filing. The auditors, he said, are merely stating what the world has known for months.

"A company which has borrowed $13.4 billion and has asked for billions more around the world is obviously in trouble. So this is anticipated," he said.

Platt said the union concessions and debt restructuring laid out in the government loan terms, plus GM's own restructuring steps that include shedding unprofitable brands, will make the company healthy again once auto sales recover from current low levels.

"I think the government has forced the hands of everybody," Platt said. "In 18 months to 24 months, I anticipate they will be profitable, in the black. A mean and lean competitor that will be world-class."

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