Report: GM’s Survival in Doubt Without More Aid

The disclosures were revealed in GM’s delayed annual report
to U.S. Securities Regulators and a 25-page discussion of growing risks facing
the automaker ranging from tight credit and troubled suppliers to slumping
demand for new cars around the world.

“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 accounting firm Deloitte
& Touche LLP wrote.

In early trading Thursday, GM’s shares fell more than 15
percent from Wednesday’s close, to $1.86.

GM has received $13.4 billion in federal loans as it tries
to survive the worst auto sales climate since the early 1980s. It is seeking a
total of $30 billion from the government. During the past three years it has
piled up $82 billion in losses, including $30.9 billion in 2008.

The company faces a March 31 deadline to have signed
agreements of concessions from debt holders and the United Auto Workers union
to show the government it can become viable again. On Feb. 17, it submitted a
restructuring plan to the Treasury Department that includes laying off 47,000
workers worldwide by the end of the year and closing five more U.S. factories.

GM said in the filing that its future depends on
successfully executing the 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 U.S. Bankruptcy Code,” it said in the
report.

If it misses the deadline later this month, GM would be
unlikely to get additional loans it says are needed, and the government could
demand immediate repayment of its outstanding loans. GM said in the filing that
it had no way to repay the loans right now and could soon become insolvent
without at least $9.1 billion more aid. It wants a total of $30 billion.

“If we fail to obtain sufficient funding for any
reason, we would not be able to continue as a going concern and could
potentially be forced to seek relief under the U.S. Bankruptcy Code,” it
said.

GM said that it still believed it could be viable and that
it did not intend to file for bankruptcy protection.

Analysts at Standard & Poor’s Ratings Services have
already said there is a high probability that GM would have to file for
bankruptcy, given the weakness in the car market, the New York Times reported.

GM, the report said, is highly dependent on auto sales
volume, which dropped rapidly last year. “There is no assurance that the
global automobile market will recover or that it will not suffer a significant
further downturn,” the company wrote.

Northeastern University professor Harlan Platt, who teaches
about corporate turnarounds, told the Associated Press that 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.

The Detroit-based automaker said repeatedly that a
bankruptcy filing could force liquidation because of the lack of financing its
reorganization would require and consumer reluctance to buy vehicles from a
bankrupt automaker. Car buyers, the company has said, would be reluctant to buy
from an automaker in Chapter 11 due to fears that it wouldn’t be around long
enough to honor warranties or make replacement parts.

Platt said 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.”

Representatives of GM’s bondholders were scheduled to meet
Thursday with the U.S. auto task force. Under GM’s bailout, its debt holders
have been asked to take a payout of one-third of the $27 billion GM owes
through a debt-for-equity swap.

Bondholders have balked at those terms and are asking
Washington to guarantee their remaining debt in the automaker.