March 6, 2009 at 10:07 am

Auditor raises GM bankruptcy specter

Dire annual report outlines various Chapter 11 triggers

General Motors Corp.'s independent auditor Thursday said there is "substantial doubt" about the automaker's viability and the company outlined a number of scenarios that could trigger a Chapter 11 bankruptcy filing.

The disclosures, and persistent specter of bankruptcy were contained in a gloomy annual report that sparked anxiety on Wall Street, where concern about GM's future and that of big banks sent stocks to 12-year lows.

GM is waiting to hear whether it will get as much as $16.6 billion in additional federal aid, but a top executive Thursday backed off saying the automaker will run out of cash this month unless it receives $2 billion from the U.S. Treasury Department.

Chief Financial Officer Ray Young moved away from last month's disclosure that GM would run out of money unless it received more aid this month. On Feb. 17, GM executives said the company needed $2 billion this month and $2.6 billion in April to stay afloat. GM has received $13.4 billion in loans.

"Things change. I really can't comment on whether we need it or not or when we need it," Young told The Detroit News. "We are monitoring our global liquidity very carefully."

GM, which lost $30.9 billion last year, ended 2008 with $14 billion in cash, securities and assets -- about $3 billion more than the minimum amount it needs to pay bills.

The U.S. Treasury Department has not signaled whether additional funds are coming, Young said.

"We haven't received any commitment," he said. "We are going to continue to work with Treasury and work through all the details."

Meanwhile, the Obama administration's top auto advisers will travel to Detroit next week to meet with all three domestic carmakers and labor leaders, sources said.

Steve Rattner and Ronald Bloom, who will help decide whether to give GM and Chrysler LLC up to $21.6 billion in additional aid, will be in Detroit on Monday to meet privately with top executives of GM, Ford Motor Co. and Chrysler, all of which are expected to show off advanced technology in new vehicles.

Stock tumbles

News of the autos task force's visit came as GM included the so-called "going concern" opinion from auditing firm Deloitte & Touche LLP. Last week, GM warned that such an opinion was forthcoming, but Wall Street's reaction Thursday sent the automaker's shares tumbling more than 18 percent before closing at $1.86, down 34 cents, or 15.5 percent.

"In some respects, I'm a little bit surprised at the reaction of the market," Young said. "The best thing we can do is keep moving forward on our restructuring actions."

The report also said bankruptcy is possible unless the automaker implements a broad restructuring plan that involves eliminating 47,000 jobs this year, shuttering 14 plants by 2012 and selling, shrinking or killing its Saturn, Hummer, Pontiac and Saab brands.

The annual report says GM's ability to survive largely hinges on a rebound in vehicle sales. U.S. vehicle sales have fallen 40 percent from the peak in 2007 and global sales have fallen 23.5 percent since January 2008.

The auditor's opinion "is dependent on a number of factors including our ability to execute our viability plan, compliance with our U.S. Treasury loans, volume recovery of the industry, and access to additional funding from the U.S. and certain other governments," GM spokeswoman Renee Rashid-Merem said in a prepared statement. "Once global automotive sales recover and GM's restructuring actions generate the anticipated savings and benefits, the company is expected to again be able to fund its own operating requirements."

GM's sales last month fell 53 percent and the automaker expects sales to decline more this year before starting to recover in 2010.

Analysts and corporate restructuring experts said the auditor's opinion was largely a nonissue considering GM's public requests for aid and previously disclosed financial problems.

"I just think it emphasizes to everybody that it's an extremely tenuous situation," said Brad Coulter, director of O'Keefe & Associates, a Bloomfield Hills-based financial consulting firm and turnaround adviser.

White House aware of stakes

At the White House, where officials have less than a month to decide whether and how to aid GM further, the auditor's finding had been expected, and the administration said it was fully aware of what was at stake in its deliberations over additional aid.

"The administration is very mindful of the challenges in the auto sector," White House spokeswoman Amy Brundage said. "Our team is working around the clock to develop the most thoughtful approach possible to the situation."

The White House task force on the auto industry met Thursday morning with Fiat SpA CEO Sergio Marchionne, whose company is seeking a partnership with Chrysler, and met in the afternoon with representatives of a group of GM bondholders.

The annual report also showed Chairman and CEO Rick Wagoner's total compensation last year was $5.5 million, down from $14.1 million in 2007. Wagoner, who is taking a $1 salary, received a $2.1 million salary last year and was not paid a bonus, according to the filing.

President and Chief Operating Officer Fritz Henderson, meanwhile, was paid $1.7 million last year, a 76 percent pay cut.

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