GM annual report concedes bankruptcy option

In the wake of its huge restructuring plan last month, General Motors dropped a bombshell in the routine annual report it filed with the U.S. Securities and Exchange Commission (SEC) last night. Near the bottom of the report, under the heading: "Risks related to us and our Automotive Business," the company states: "There is substantial doubt about our ability to continue as a going concern."

Uh, oh. While that's not a surprise, and many others have said it, having GM and its public auditors come out and state it so bluntly punctuates the point.

It goes on:

"Our independent public accounting firm has issued an opinion … that … our recurring losses from operations … 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. … Our future is dependent on our ability to execute our Viability Plan successfully or otherwise address these matters. If we fail to do so for any reason, we … could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code."

(Excerpts were cut for length and clarity as indicated.)

And that Viability Plan, asking for an additional $9 billion in public loan guarantees is by no means a sure thing:

"Our business, the success of our Viability Plan and our ability to continue as a going concern are highly dependent on sales volume. …Sales volumes may decline more severely or take longer to recover than we expect, however, and if they do, our results of operations and financial condition and the success of the Viability Plan will be materially adversely affected."

And even if sales do recover, that may not be enough, the company also needs aid from other countries:

"The success of our Viability Plan and our ability to continue as a going concern depends on our compliance with the terms of the UST [U.S. Treasury] Loan Agreement and on the availability of additional financing from the United States and certain foreign governments."

So far the governments of Sweden and Germany, at least, have expressed reluctance to help out the ailing U.S. giant.

While possible bankruptcy options were also laid out in GM's restructuring plan, the company was required to list them by the terms of the loan guarantees. And as laid out by the company, they clearly looked much more costly than taxpayer aid. This time, no one was holding a gun to the company's head to put the option on the table. It seems, auditors simply included it as a way to be thorough and accurate.

In a related press release, GM followed up by stating: "The auditor's opinion has no impact on the aggressive actions we are taking to restructure our business for long-term viability."

Read the full report submitted to the SEC.  

—Eric Evarts