After sharp loss, GM says auditors are considering its survival
DETROIT -- General Motors gm, after posting a $9.6 billion fourth-quarter loss Thursday, said its auditors are examining whether they believe GM can continue as a going concern — a foreboding sign that could mean the auditors are worried GM can't stay in business or will need to file for bankruptcy protection.
Chief Financial Officer Ray Young says a lot is riding on whether GM gets more government aid. GM has already received $13.4 billion, but is burning through billions each quarter. During the fourth quarter, the automaker went through $6.2 billion. The first quarter of 2009 is expected to be worse.
Young says GM expects to receive the "going concern" notice, which casts doubt on the future of the company. Many companies that get this notice soon file for bankruptcy court protection. If it comes, it will be in GM's 10-K filing, which is due at the beginning of March but will be posted late, Young says.
"It doesn't mean they are going out of business, but it means there is an elevated risk," says Efraim Levy, an analyst with Standard & Poor's.
The going concern statement protects the auditors by notifying investors that stock in the company is a risky bet, Levy says, and that the company could go out of business. But that could change, if the automaker were to receive government funding.
The company has received $13.4 billion in federal loans since Dec. 31 and says it needs up to $30 billion to stay out of bankruptcy. Top GM executives were in Washington, D.C., Thursday to meet with the Obama administration's auto task force to talk about restructuring and additional loans.
Global auto sales are weakening quickly, GM said.
"2008 was an extremely difficult year for the U.S. and global auto markets, especially the second half," Chairman and CEO Rick Wagoner said. "These conditions created a very challenging environment for GM and other automakers and led us to take further aggressive and difficult measures to restructure our business."
GM reported a net loss of $15.71 a share for the fourth quarter, compared with a loss of $722 million, or $1.28 a share in the year-ago period.
Quarterly revenue fell 39% to $30.8 billion from $46.8 billion, as credit availability froze across the globe, and a lack of consumer confidence and fears of job losses kept people from buying cars and light trucks.
Excluding special items, GM's fourth-quarter adjusted loss was $5.9 billion, or $9.65 a share.
That was worse than Wall Street expected. Analysts surveyed by Thomson Reuters predicted a quarterly loss of $7.40 a share on sales of $35.1 billion.
For the full year, the loss was $53.32 a share, second-worst annual result in the company's history. The worst occurred in 2007, when GM lost $38.7 billion, or $68.45 a share, due largely to charges for unused tax credits.
GM has lost $82 billion over the past four years and cut 92,000 jobs over that period. The combined loss for the top U.S. automaker is equivalent to about $56 million a day since the start of 2005.
The company last year announced the closure of four assembly plants and a parts stamping factory.
Last week, a plan GM submitted to the Treasury Department to justify more loans said the company would close five more U.S. factories and cut another 47,000 jobs globally. GM also reached a tentative deal with the United Auto Workers on concessions that will reduce labor costs.
GM ended last year with about $14 billion in cash, $10.5 billion less that the $24.5 billion it had at the end of 2007. The 2008 figure is close to the minimum amount of cash GM has said it needs to fund its operations.
Young told reporters the credit crisis spread from the U.S. to other markets, making the fourth-quarter a challenging one.
But there was some hope, he said. While global sales fell, some emerging markets, such as China, are off to a good start in 2009.
"A lot of the governments in these countries are putting a lot of stimulus into the economy as well as the automotive market," he said, citing lower sales tax rates on cars sold in China and Brazil.