Tim O'Brien | Mar 6, 2009

There is nothing new in the announcement from GM’s auditors that there is “substantial doubt” about the giant automaker’s viability as a company. Who didn’t know that?

In producing its report GM’s auditors Deloitte & Touche are only doing what auditors do: running a cold blood-less eye over the integrity and accuracy of the books, casting another over the accuracy of the financial reporting; then running a third searing eye over revenues, the real assets and liabilities, and... yep, you’re right, "Houston, we’ve got a problem."

In this report, the auditors are simply affirming what Rick Wagoner and his merry band have been telling the US Administration and American tax-payers for months: GM is at the brink of bankruptcy and will fall – and it will be messy - without sustained and substantial Government loans.

The only question mark has been the size of ‘hole’ in GM’s balance sheets and how many more barrow-loads of billions need to be tipped into it to keep the company viable.

gm_rick-wagoner

There would appear to be a number of possible answers (there have been at least three given thus far) to that question. Having received USD$13billion in Federal loans, GM now claims that it may need up to USD$30billion in total loans to sustain operations.

So, yes, GM’s “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”. (Deloitte & Touche)

The problem now is that GM’s destiny is caught in a self-filling downward slide. It needs customers for its cars – that’s where it derives its income.

But customers, even in the best of times, are resistant to buying from a brand with the spectre of bankruptcy over its head. In the worst of times, like, now, they're completely spooked from showrooms.

So they stop buying... and so the problem gets inexorably worse, and the downward spiral accelerates.

GM’s US sales dropped 53 percent in February.

President Obama therefore is in a bind. Saving GM will require tens of billions more in tax-payer funded loans than anticipated, yet, without customers in showrooms, nothing will stop the rising sound of the death rattle.

Adding to GM's woes is that it is proving difficult off-loading, or partially off-loading, its non-performing brands (Saab, Hummer, and even Opel and Vauxhall). While financial markets are frozen, consolidations, let alone finding buyers for dismally performing assets, are near impossible.

For Holden, tied to GM’s fortunes, things are also somewhat uncertain. As a Holden Senior Executive told this correspondent last week, “It is out of our hands, it is a day to day thing.”