‘Substantial doubt’ over GM future
Auditors say giant US car-maker faces bankruptcy unless it stems massive losses.
‘Aid vital’
The company said in the report that its future depends on successfully winning the government aid.
“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 US Bankruptcy Code,” the Detroit-based car-maker said in the annual report.
Al Jazeera’s Rob Reynolds in Washington said the situation for General Motors was already widely known and that the release of the report could be a negotiating tactic to help it win concessions from creditors and the union.
| A US giant under threat |
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GM is the ninth largest company in the world and the world’s second largest automaker after ToyotaHowever, stocks fell sharply following the announcement of the report, with the Dow Jones Industrial index falling 281.40 points, or 4.1 per cent, to reach 6,594.44 points at the end of Thursday’s trading.
General Motors has already received $13.4bn in government loans as it tries to survive the worst vehicle sales market in decades.
The company has lost about $82bn since 2005 and has been hit hard by the steep drop in global vehicle sales in the past year.
On Tuesday, General Motors reported a sales drop of more than 53 per cent in the US compared to February 2008.
Jan Randolph, an analyst at Global Insight, told Al Jazeera: “We’re talking about what was once one of the biggest companies in the world. It is at the core of American industry.
“Yesterday’s audit was one of the reasons why stock markets fell.”
Randolph said: “The immediate problem is the collapse in sales. In the short term they may be running out of cash and may need some loans to cover that.
“But longer term there needs to be restructuring. They need to find a way of surviving into the future, and that probably means a much smaller and restructured General Motors.”
Economy fears
The firm’s report is the latest blow to the struggling US economy, which is facing the worst recession since the Great Depression of the 1930s.
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| Foreclosures also rose on another gloomy day for the US economy [GALLO/GETTY] |
On Thursday, a US mortgage industry survey said a record 5.4 million US homeowners with a mortgage, almost 12 per cent of the total, were either behind on their payments or in foreclosure at the end of 2008.
The number of new unemployment benefit claims fell from 670,000 to 639,000 for the week ending February 28, the US labour department also said on Thursday.
Analysts had predicted new claims of 650,000 last week.
“We had a bit of a drop, but a drop from a high level, so the numbers remain very high. This continues to be a very weak labour market,” said David Wyss, chief economist at Standard & Poor’s credit agency in New York.