You probably saw the news stories today which referred to press releases which referred to a "Securities and Exchange" filing which General Motors released today (Thursday March 5, 2009). The filing is the "10-K" which basically an annual report in a standard format, without the glossy photos but with more info.
The 10-K says bluntly:
There is substantial doubt about our ability to continue as a going concern.
There are lots of sites which repackage public-domain SEC filings and sell them back to us for a fee but the 10-K and similar items are readily available on GM's corporate web site.
The 10-K says bluntly:
There is substantial doubt about our ability to continue as a going concern.
GM's executives want very much to avoid going into bankruptcy. They instead want us taxpayers to loan the company money to carry out a "Viability Plan"-- a plan which is based on rather optimistic projections of how fast the economy can improve, much more optimistic than the assumptions GM uses for other purposes. They don't want to file for bankruptcy because the terms of bankruptcy are much harsher than those currently being imposed by the Obama administration.
I am reminded of something Suze Orman (who admittedly is a pompous loudmouth): if you can't pay your bills, you are already bankrupt--- even if you don't file for bankruptcy.
GM cannot pay its bills out of its current and future cash flows. It is not selling enough cars and trucks (as well as parts, etc.) to pay for itself. It is already bankrupt. I think we taxpayers need to raise the question of why we are subsidizing GM instead of sending it through the regular bankruptcy process. (GM would not disappear altogether. Bankruptcy only equals death in Monopoly. This is real life. Most of GM's business units have some value, and it has some strong brands--- even though GM as a whole is less than the sum of its parts. The company's assets would be liquidated: some of its business units would continue under new ownership and quite possibly the company as a whole could continue operating in downsized form.)
It is especially ironic that we are allowing "Too Big to Fail" corporations such as GM to circumvent bankruptcy law when we made bankruptcy law much harsher for ordinary individuals (and their small businesses) not long ago. (A smaller irony is that, at the same time that GM is bypassing bankruptcy court by financing itself with corporate welfare, the company is trying to do a leveraged buyout of one of its major suppliers--- Delphi Steering. Delphi recently ended up going formally bankrupt, since it was small enough to fail.)
Here is a quite from the 10-K they filed on March 5:
While we describe each risk separately, some of these risks are interrelated and certain risks could trigger the applicability of other risks described below. Also, the risks and uncertainties described below are not the only ones that we may face. Additional risks and uncertainties not presently known to us, or that we currently do not consider significant, could also potentially impair, and have a material adverse effect on, our business, results of operations and financial condition.
Risks Related to us and our Automotive Business
There is substantial doubt about our ability to continue as a going concern.
Our independent public accounting firm has issued an opinion on our consolidated financial statements that states that the consolidated financial statements were prepared assuming we will continue as a going concern and further states that our recurring losses from operations, stockholders’ deficit 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 plans concerning these matters, including our Viability Plan, are discussed in Note 2 to the accompanying audited consolidated financial statements. 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 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.
Our business, the success of our Viability Plan and our ability to continue as a going concern are highly dependent on sales volume. In 2008, global vehicle sales declined rapidly and there is no assurance that the global automobile market will recover or that it will not suffer a significant further downturn.
Our business and financial results are highly sensitive to sales volume, as demonstrated by the effect of sharp declines in vehicle sales in the United States since 2007 and globally during 2008. Vehicle sales in the United States have fallen 40% since their peak in 2007, and sales globally have declined 23.5% since their peak in January 2008. The deteriorating economic and market conditions that have driven the drop in vehicle sales, including declines in real estate values and household incomes, rising unemployment, tightened credit markets, weakened consumer confidence and volatility in oil prices, are not likely to improve during 2009 and may continue past that year. Our Viability Plan is based on assumptions that vehicle sales will decline further in 2009 but that they will begin to recover in 2010. 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.
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 Loan Agreement, and on the availability of additional financing from the United States and certain foreign governments.