General Motors (GM) warned it could be liquidated through bankruptcy after its auditors voiced “substantial doubt” about the struggling automaker’s ability to stay afloat in an annual report released on Thursday.
GM is currently funding its operations with US$13.4 billion in emergency loans from the US government and said last month it will need an additional US$22.6 billion in government aid if it is to survive a collapse of global auto sales amid a deepening recession.
The US Treasury has not yet announced whether it would grant GM the additional loans and is reportedly considering whether the automaker should be restructured under bankruptcy protection.
“The administration is very mindful of the challenges in the auto sector,” Treasury spokesman Isaac Baker said. “Our team is working around the clock to develop the most thoughtful approach possible to the situation.”
The independent auditors concluded that GM’s “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,” GM said in the report filed with securities regulators.
The automaker cautioned in a statement that this assessment was “not unexpected” and “has no impact on the aggressive actions we are taking to restructure our business for long-term viability.”
A week ago GM warned of a “challenging” year ahead as it posted a US$30.9 billion loss last year, bringing the tally from four consecutive years of bleeding balance sheets to a whopping US$86.6 billion.
GM has asked the US Treasury for an additional US$16.6 billion and said it needs another US$6 billion from the governments of Canada, Germany, the UK, Sweden and Thailand.
GM warned in its report that it “could potentially be required to seek relief through a filing under the US Bankruptcy Code, either through a prepackaged plan of reorganization or under an alternative plan, which could include liquidation” if it is not able to obtain those loans.
The largest US automaker has repeatedly said it will likely be liquidated if it is forced into bankruptcy protection because consumers would be wary of buying its vehicles. In the restructuring plan submitted to the US Treasury last month, GM estimated it would need up to US$100 billion in government financing to restructure under bankruptcy protection.
Meanwhile, Japan’s key stock index dropped more than 3 percent to a four-month closing low yesterday after worries over GM’s fate and growing pessimism about the US economy dragged Wall Street sharply lower overnight.
The benchmark Nikkei 225 index tumbled 260.39 points, or 3.5 percent, to 7,173.10, the lowest since it closed at 7,162.90 on Oct. 27 last year. The broader Topix index fell 2.7 percent to 721.39, the lowest since Dec. 24, 1983, when it finished at 715.68.
“Taking a cue from Wall Street, investors dumped shares and their sentiment was really downbeat throughout the day due to uncertainty over the fate of GM,” said Masatoshi Sato, market analyst at Mizuho Investors Securities Co.
“Investors cannot really figure out what will happen to GM. If it goes under, investors are worried about its ripple effect on the auto industry, the US economy and the US stock market. They are worried that the impact of GM’s bankruptcy on the US economy will be massive,” Sato said.
CLASH OF WORDS: While China’s foreign minister insisted the US play a constructive role with China, Rubio stressed Washington’s commitment to its allies in the region The Ministry of Foreign Affairs (MOFA) yesterday affirmed and welcomed US Secretary of State Marco Rubio statements expressing the US’ “serious concern over China’s coercive actions against Taiwan” and aggressive behavior in the South China Sea, in a telephone call with his Chinese counterpart. The ministry in a news release yesterday also said that the Chinese Ministry of Foreign Affairs had stated many fallacies about Taiwan in the call. “We solemnly emphasize again that our country and the People’s Republic of China are not subordinate to each other, and it has been an objective fact for a long time, as well as
‘CHARM OFFENSIVE’: Beijing has been sending senior Chinese officials to Okinawa as part of efforts to influence public opinion against the US, the ‘Telegraph’ reported Beijing is believed to be sowing divisions in Japan’s Okinawa Prefecture to better facilitate an invasion of Taiwan, British newspaper the Telegraph reported on Saturday. Less than 750km from Taiwan, Okinawa hosts nearly 30,000 US troops who would likely “play a pivotal role should Beijing order the invasion of Taiwan,” it wrote. To prevent US intervention in an invasion, China is carrying out a “silent invasion” of Okinawa by stoking the flames of discontent among locals toward the US presence in the prefecture, it said. Beijing is also allegedly funding separatists in the region, including Chosuke Yara, the head of the Ryukyu Independence
‘VERY SHALLOW’: The center of Saturday’s quake in Tainan’s Dongshan District hit at a depth of 7.7km, while yesterday’s in Nansai was at a depth of 8.1km, the CWA said Two magnitude 5.7 earthquakes that struck on Saturday night and yesterday morning were aftershocks triggered by a magnitude 6.4 quake on Tuesday last week, a seismologist said, adding that the epicenters of the aftershocks are moving westward. Saturday and yesterday’s earthquakes occurred as people were preparing for the Lunar New Year holiday this week. As of 10am yesterday, the Central Weather Administration (CWA) recorded 110 aftershocks from last week’s main earthquake, including six magnitude 5 to 6 quakes and 32 magnitude 4 to 5 tremors. Seventy-one of the earthquakes were smaller than magnitude 4. Thirty-one of the aftershocks were felt nationwide, while 79
MARITIME SECURITY: Of the 52 vessels, 15 were rated a ‘threat’ for various reasons, including the amount of time they spent loitering near subsea cables, the CGA said Taiwan has identified 52 “suspicious” Chinese-owned ships flying flags of convenience that require close monitoring if detected near the nation, the Coast Guard Administration (CGA) said yesterday, as the nation seeks to protect its subsea telecoms cables. The stricter regime comes after a Cameroon-flagged vessel was briefly detained by the CGA earlier this month on suspicion of damaging an international cable northeast of Taiwan. The vessel is owned by a Hong Kong-registered company with a Chinese address given for its only listed director, the CGA said previously. Taiwan fears China could sever its communication links as part of an attempt
RSS