With whispers of General Motorsâ€™ possible bankruptcy growing louder each day, auditors to the firm have released a report claiming there is â€œsubstantial doubtâ€ surrounding the car maker's ability to continue operations.
GM has struggled to generate cash flow in the worst automotive market for 27 years. Poor product planning, slow moving development of new models and a history of poor management mean ongoing losses for the company.
Last week, GM announced a USD$30.9 billion (AUD$48.5 billion) loss for 2008 and issued a warning that 2009 was going to be â€œchallengingâ€.
Already GM has announced 47,000 jobs are to be cut worldwide and has indicated that a further USD$22.6 billion (AUD$35.5 billion) in government assistance may be required to keep the company afloat.
In light of the report from auditors Deloitte & Touche, GMâ€™s creditors had decided not to pursue more than USD $6 billion (AUD $9.4 billion) in outstanding loans in the hope of assisting the companies chances of receiving additional federal aid. News of the report sent GM shares tumbling even further, down 15 percent in early trading.
A bankruptcy filing from GM would most likely lead to liquidation for the firm, as the company does not possess the funds required to finance its own reorganisation. GM fears that consumers would be unlikely to purchase vehicles from a bankrupt manufacturer.
Earlier this week GM Europe warned that without immediate financial assistance, European operations could cease within a matter of weeks, forcing the losses of over 300,000 jobs.
General Motorsâ€™ most recent annual report states that if for any reason the company is unable to adhere to its viability plan, it will have to file for US bankruptcy.