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'Substantial doubt' for GM future

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There is "substantial doubt" about the ability of General Motors (GM) to stay afloat, the firm's auditors have said.

[smaller]BBC NEWS | Thursday, 5 March 2009 | Link[/smaller]

Ongoing losses and the struggle to generate cashflow meant the firm's ability to continue as a going concern should be questioned, they added.

Last week GM posted a $30.9bn (£21.9bn) loss for 2008 and warned that 2009 was set to be "challenging".

The firm, which plans to cut 47,000 jobs also said it might need another $22.6bn in government loans to survive.

It has already received $13.4bn in federal loans as it struggles in what analysts say is the worst vehicle sales market in 27 years.

GM said that its creditors had decided not to force the company to repay more than $6bn in loans following the auditor's warning, in order to let GM press the case for more government financial aid.

Shares in General Motors fell almost 15% in early New York trading.

Liquidation fear

"The corporation's recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern," auditors for Deloitte & Touche wrote in the annual report.

GM reiterated on Thursday that a bankruptcy filing could lead to liquidation, as the company would not have enough funds to finance its reorganisation.

Besides, consumers could be reluctant to buy bankrupt carmakers' vehicles, GM said.

According to GM, its February sales plummeted 53% from a year earlier, as its rival Ford posted a 48% drop.

Step in

The auditors' remarks reflect comments already made by the firm about its dire difficulties.

Earlier this week, GM's top executive warned the European divisions of General Motors (GM) could collapse within weeks without European governments' help - costing up to 300,000 jobs.

Chief operating officer Fritz Henderson said governments should step in immediately to ensure GM Europe did not run out of money by April or May.

GM said in its annual report: "Our future is dependent on our ability to execute our viability plan.

"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."

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I'm not at all surprised about what has happened to GM and Ford. If they did the maths years ago they would have realised that people wouldn't be able to afford to run their volume sellers (mostly gas guzzlers) if oil went over $100 per barrel, which was inevitable really.

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yep, that's quite right

but it's interesting to follow this, because they're currently looking for ways to save the (relatively profitable) German GM subsidiary Opel...

we'll see where this leads, Scandinavian Saab already had to quit

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I feel bad for the people who are losing their jobs over this.....but my husband owned both a Ford Mustang and a Chevy SUV and had problems with them both. I think they were very short-sighted and let other automakers get ahead of them, and now they are suffering from the error of their ways.

That can be said for many, many businesses unfortunately.

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I'm just surprised it's happening now and not before when they first introduced the hummer and other gas-guzzling junk. They deserve to sink under the weight of their idiotic sales policies. Maybe this will give rise to efficient companies that make quality automobiles.

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Toyota is made here in the US, so I'd say Americans can make good automobiles. I've seldom heard complaints about their econoboxes as opposed to ford, gm, and chrysler - the bulk of it is junk that falls apart in less than a few years with recalls galore. SUVs are terrible across the board, and the explorer has to be one the prime posterchild for crap, which is not only crap, but crap that will kill ye. Not since the corvair has there been such a complete disregard for driver safety, and their cop out of blaming the tire company added insult to injury. Now, ford has flipped itself over for these kinds of mistakes.

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Ahh , but you are paying top dollar for those Japanese cars now . I really think that the ' anti big 3 ' mindset has been passed on for years to the point of becoming a fact . The situation being now serious , I would say but American and hold them to service for as long as possible . It's not that they can't .

I'm driving a used BMW - and it's a piece of crap as well . I'd love a Cadillac or a Lincoln as their engines are far better made than any other makers .

Edited by Guest

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Au contraire, Kevin. My family has bought Toyotas for ages and they've all been efficient (and cheap) automobiles in terms of purchase price, depreciation/resale value, and repairs (or lack thereof). We had a ford tempo way back and that thing was finicky, moody, and unpredictable. We finally had to put it out of its misery (and ours) and sold it to the first fool who offered cash for it.

GM's only saving grace have been the trucks. We have one of those and it's like nothing the Japanese, Koreans, and Europeans ever built. This is the kind of efficient and pragmatic type of thing they shoulda stuck with from the start, whereas the hummer is f***ing eyesore and a relic of bloated times of excess and pure, unbridled stupidity that some confused for opulence - just like the overpriced/inflated houses they live in that they cannot afford. A company responsible for this type of monstrosity deserves to sink just like the lemmings who bought into this.

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Well , fair enough . Nothing does match a Dodge Ram for power and coolness for sure . :D

I'd just like people to buy American cars that are good , if they can find one . Without a declaration or bill of protectionism ,I'd like people not to jump the gun and think all American cars are crap . Seriously , in these bad times , buying something from home -if it suits your needs and is reliable -makes a lot of sense and is patriotic as well as helping out your neighbor . Screw this global economy - it was a bad idea to start with .

Edited by Guest

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I feel the United Auto Workers union must stand on the bridge of this sinking ship, shoulder to shoulder with planning personnel and uninspired car dealerships. UAW's longstanding wage/benefit demands and unwillingness to make even small concessions, without screaming and kicking like a kid at a candy bar laden checkout lane, have gradually helped price new cars beyond what most people feel is their real value point.

I am surprised the management (yes, true management - they have an administrative agenda as well) of the union did not weigh in for this article. Historically, the union tactic of decrying slothful, evil car manufacturer white collar workers versus the poor, downtrodden assembly worker is shouted loudest when the car companies seem to be perilously close to insolvency.

I recall while working in the Detroit area from 1978-1982, during which time the first gas shortages hit the car companies with a knockout punch, how the mere mention of layoffs sent the entire union flooding onto the streets with picket signs and how they backed down GM, Chrysler and Ford by promising to shut down operations nationwide. As I drove past Ford's sprawling River Rogue plant one fall day, I noticed one of the picketers waving a sign that read - honestly, you can't make this stuff up - "People Over Profits!" As if one had nothing to do with the other.

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Nothing does match a Dodge Ram for power and coolness for sure . :D

Hmm, I'll agree with your words, "nothing does match" the complete unreliability of a Dodge truck's horrendous transmission.

Two good buddies of mine;

One bought a brand new 10 cylinder Viper Dodge truck and the other bought a brand new Rumble Bee Dodge Hemi (both very sweet looking trucks BTW, because one was Dodge's bright fire-engine-red w/hood scoop and the other Dodge sunlight yellow w/t black bumble-bee stripes and dual emblems & chrome exhausts). I understand the Dodge Daytona truck with the huge, unnecessary tail-fin has the same transmission as well, along with the recent Charger. Oh well.

The transmissions in the aforementioned trucks blew @ approximately 65000 miles or 132000 kilometers, which ever came first.

Get a Dodge because they look pretty! :D Just make sure you pay an extra five grand for the extended warranty that will eventually pay for the obsolete transmission.

A Dodge truck is beautiful but then so is the Mona Lisa. Some things are only meant to observe and never touch. There're paintings on my wall that I'd never consider driving, if that makes any sense.

:)

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My Nissan Pathfinder is a gas guzzler, I'll admit, but it's 7 years old, has almost 140,000 miles on it and has not spent one day in the shop for anything other than maintenance in the four years I've owned it.

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Nissan is good stuff! I own the Titan pick-up truck and so far it has been PERFECT!

:)

Back to GM's fate . . .surprisingly, I would've thought the new "retro" Camaro would've gained substantial profits.

Sad thing is, foreign cars (to America) are built better, run better, last longer and get better gas mileage than American manufactured cars.

If GM goes under then Chrysler is next followed with Ford running a tight third.

I mean, which would you rather drive, a Chevy Cavalier or a Ferruccio Lamborghini?

;)

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