Page last updated at 15:53 GMT, Thursday, 5 March 2009

'Substantial doubt' for GM future

A GM plant in Brazil
GM is struggling in the dire market for new cars

There is "substantial doubt" about the ability of General Motors (GM) to stay afloat, the firm's auditors have said.

Ongoing losses and the struggle to generate cashflow meant the firm's ability to continue as a going concern should be questioned, they added.

Last week GM posted a $30.9bn (21.9bn) loss for 2008 and warned that 2009 was set to be "challenging".

The firm, which plans to cut 47,000 jobs also said it might need another $22.6bn in government loans to survive.

It has already received $13.4bn in federal loans as it struggles in what analysts say is the worst vehicle sales market in 27 years.

GM said that its creditors had decided not to force the company to repay more than $6bn in loans following the auditor's warning, in order to let GM press the case for more government financial aid.

Shares in General Motors fell almost 15% in early New York trading.

Liquidation fear

"The corporation'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," auditors for Deloitte & Touche wrote in the annual report.

GM reiterated on Thursday that a bankruptcy filing could lead to liquidation, as the company would not have enough funds to finance its reorganisation.

Besides, consumers could be reluctant to buy bankrupt carmakers' vehicles, GM said.

According to GM, its February sales plummeted 53% from a year earlier, as its rival Ford posted a 48% drop.

Step in

The auditors' remarks reflect comments already made by the firm about its dire difficulties.

Earlier this week, GM's top executive warned the European divisions of General Motors (GM) could collapse within weeks without European governments' help - costing up to 300,000 jobs.

Chief operating officer Fritz Henderson said governments should step in immediately to ensure GM Europe did not run out of money by April or May.

GM said in its annual report: "Our future is dependent on our ability to execute our viability plan.

"If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the US bankruptcy code."

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