In what I consider good news, GM’s Auditor Expresses Doubts Over Survival.
General Motors Corp. shares fell as much as 18% on Thursday after the troubled automaker and its auditor stoked more doubts that the company can keep its assembly lines running amid a historic dearth of new-car buyers.
The stock moved down 38 cents to $1.82 in midday trading, as part of a broad pullback in the Dow Jones Industrial Average (INDU). Prompting the retreat, GM reiterated in a Securities and Exchange Commission filing that bankruptcy is a possibility if its viability plan, as submitted to the Congress, doesn’t succeed.
The Detroit-based giant is seeking up to $30 billion in loans from the U.S. government, as well as loans from foreign governments including Canada, Germany, the U.K., Sweden and Thailand for up to $6 billion more.
Deloitte & Touche made a similar analysis, concluding that GM’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.”
“The best course of action, if such a thing exists, would be for the bondholders and the United Auto Workers to come to some sort of agreement to do what it takes to make GM viable,” he said. “Given the current administration, what are the odds that the Democrats tell the UAW to dissolve the union? It’s just not very likely.”
I resent taxpayer money bailing it out just as I resent taxpayer money bailing out banks and homeowners. I consider this admission “good news” because I am hoping that the Obama administration finally comes to its senses and stops throwing money down black holes.
Unlike what CEO Wagoner is saying, we will find that a GM bankruptcy will not be the end of the world. Furthermore, a bankruptcy of Citigroup or AIG would not be the end of the world either.
The Obama administration has had too much reckless hope and not enough reality when it comes to handling the banks, the auto industry, and the housing industry. The sooner we get to the bottom, the better off everyone will be. We can only get to the bottom if we stop rewarding failed institutions with taxpayer money.
Mike “Mish” Shedlock
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