GM Loses Faith in Itself

$31 billion in annual losses, pleas for government help, a totally obsolete model line: the once-proud auto manufacturer is now a basket case. And now they had to admit to the Securities and Exchange Commission that they might go bankrupt. The markets plunged.

Opel-parent company General Motors is now questioning its own chances for survival. On Thursday, they announced they may seek Chapter 11 bankruptcy protection if they are unable to stem their losses. In its annual report to the Securities and Exchange Commission, GM admitted they could not guarantee the world automobile market would recuperate. Further, auditors doubt the company will be able to survive. The problem is caused mainly by their persistent operational losses and their inability to generate sufficient cash flow to meet financial obligations.

According to GM, their future now depends on whether or not their proposed restructuring plan submitted to the government in February is acceptable. “If the plan is in any way unacceptable, we will not be in a position to continue operations and may possibly be forced to seek protection according to government bankruptcy laws,” said a GM spokesperson, adding that there were “no guarantees that the global automobile market would recover or that it would meaningfully improve.”

GM stock fell at the opening of trading by some 14 percent, also dragging European markets down with it.

GM has already received $13.4 billion in emergency government loans. The company is asking the government for a total of $30 billion. In the past three years, the company has lost $82 billion, $30.9 billion of that in 2008 alone.

In just the fourth quarter of 2008, the Detroit company’s losses totaled $9.6 billion, far exceeding experts’ predictions. The price loss was forecast to be $7.40 per share, but in the end proved to be $9.65 per share. Quarterly turnover was $30.8 billion compared to $46.8 billion the previous year. For the entire year, revenue fell 17 percent to $149 billion.

Not only is GM’s financial situation a disaster, America’s largest automobile manufacturer is hardly selling any vehicles. In February, domestic sales of GM products fell 52.9 percent compared to the previous year. The turnover of trucks fell by 55 percent and passenger cars by 50 percent. The company plans to cut production and announced they will build 34 percent fewer vehicles during the second quarter.

CEO Rick Wagoner recently said that 2008, especially the second half of that year, had been “extremely difficult” for automobile markets in the United States, as well as globally. He called conditions for GM and other manufacturers challenging and had instructed management to pursue “further aggressive and difficult restructuring measures.”

Wagoner again repeatedly warned that the company could go bankrupt if government funds weren’t forthcoming by the end of March, at the latest. GM has that long to show the government it is capable of survival. Their reorganization plan, in part, consists of reducing personnel levels by 47,000 employees, closing some facilities, and divesting themselves of other brand names.