General Motors has once again used its Fastlane Blog (go blogs!) to defend itself from those would prefer it just enter into bankruptcy via a Chapter 11 reorganization. The latest assault comes from Harvard Law professor Mark J. Roe who published a piece entitled Would a GM Bankruptcy Crash its Suppliers? in the Wall Street Journal. GM Director of News Relations pulls out all the arguments against bankruptcy that we've heard before, the main one being that it would cost the federal government and tax payers more money in the long run. With credit markets frozen, the feds would have to foot the bill for the reorganization, which GM estimates in a worst case scenario could cost $100 billion. That worst case scenario assumes not only that auto sales for the industry would continue to fall across the board, but that the specter of bankruptcy looming over GM's operations would scare away even more buyers.
Be that as it may, the continued crash of auto sales in the U.S. could be enough to thwart GM's restructuring plans anyway. In an annual report filed by the automaker today with the SEC, GM revealed that its own auditors have "substantial doubt" about its ability to continue operations and remain a "going concern". The restructuring plan that GM submitted to the U.S. Treasury Department on Feb. 17th contains many variables, all of which have to go the automaker's way in order for the plan to work. If one of those variables doesn't work out in GM's favor, the auditors believe filing for Chapter 11 would be the necessary next step. Their opinion is not unexpected nor does it affect the company's restructuring plans in any way, but is a reminder that GM is still too large to fund its own operations at the moment.

The crux of the matter, as always, is sales. GM needs to sell enough vehicles in order to keep on the lights, continue building cars and meet its obligations to those entities it owes money. Despite the $13.4 billion in loans it's already received from the government and the other $17 billion it may yet need, GM may still not be able to avoid bankruptcy if people don't start buying cars and trucks again. Of course, car shoppers across the U.S. are in a bit of a crunch right now too, so saving GM won't do much if they don't find salvation, as well.

UPDATE:
GM response to auditor opinions included after the jump.
UPDATE 2: Bloggingstocks weighs in, "going concern" opinion means nothing

[Source: GM Fastlane Blog, Yahoo! Finance]

GM Statement Regarding Auditor's 'Going Concern' Opinion Included in the Company's 2008 10-K Filing

Auditors are required to assess whether there is substantial doubt about an entity's ability to continue as a going concern over the next year. Given GM's public statements on our liquidity position dating back to the end of 2008 and more fully disclosed in our February 17 viability plan submission, the opinion rendered in our 10-K was not unexpected.

That 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. 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.

The auditor's opinion has no impact on the aggressive actions we are taking to restructure our business for long-term viability.


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