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GM May Not Survive Outside Chapter 11

General Motor's auditors raised "substantial doubt" about the company's ability to continue its operations in the annual report filled with the US Securities and Exchange Commission, msnbc.com reported. The automaker may have to seek bankruptcy protection in case it is unable to implement a huge restructuring plan.

“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 with Deloitte & Touche said in the report.

The American manufacturer is preparing itself for the march 31st deadline, when it must present before its government signed agreements of concession with debtholders and United Auto Workers union.

“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 U.S. Bankruptcy Code,” said the auto maker in the report.

GM's worst fear concerning a possible Chapter 11 reorganization is that such a position may scare off the already frightened customers, due to concerns that the company will not be around long enough to honor warranties and spare parts requirements

Although GM says the auditor's report will not affect its restructuring plan, the announcement may trigger clauses in some of the company's loans, placing them in default.

"Consequently, we are not in default of our covenants. If we conclude that there is substantial doubt about our ability to continue as a going concern for the year ending December 31, 2009, we will have to seek similar amendments or waivers at that time,” the report said.

Thursday saw yet another disturbing news, as the company reported its CEO, Rick Wagoner, received a $14.9 million worth package in 2008. GM tried to soften the news by adding that $11.9 million of that money was in stock and options, and as GM share's sank, the value diminished to only $682,000.
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About the author: Daniel Patrascu
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Daniel loves writing (or so he claims), and he uses this skill to offer readers a "behind the scenes" look at the automotive industry. He also enjoys talking about space exploration and robots, because in his view the only way forward for humanity is away from this planet, in metal bodies.
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