General Motors warned again Thursday that it's running out of money and is at risk of bankruptcy. Citing its auditors in a securities filing, the company said "there is substantial doubt" that it can stay in business.
The company has warned of bankruptcy since late last year, but the latest comments underscore the increasing dangers facing what was once an American industrial icon.
"What the company's really saying here is they're fast approaching a point where it's just not viable anymore," NPR's Frank Langfitt tells Robert Siegel. "It can't pay the bills. And it also looks like there's a need for more government funds."
GM will owe about $2 billion to suppliers at the end of March.
"It doesn't look like they have it," Langfitt says. "And so what we're seeing again as we saw in December is another big cash crunch."
The government has already given GM about $13 billion in loans, but most of that money is being spent on everything from worker salaries to electricity. And the automaker isn't earning enough revenue to offset these costs.
Sales have been much worse than expected. In February, GM's sales were down about 53 percent from a year earlier. And it wasn't alone. Toyota's sales fell 40 percent.
GM lost nearly $31 billion in 2008 as the recession scared consumers from buying autos. The company, which is asking for an additional $16 billion from the government, has until the end of the month to present the White House auto task force with a plan to become viable.
As part of that plan, GM is negotiating with the United Auto Workers to cut retiree health care benefits. The company proposes making at least half of the $20 billion it owes for those benefits in stock instead of cash. But that's a tough sell, with GM stock currently trading below $2 per share. The automaker is also trying to restructure about $27 billion in debt with bondholders.
The company hopes to avoid filing for bankruptcy. "GM's great fear is that no one will buy a car from a bankrupt company," Langfitt says. "What they're afraid is if they go into Chapter 11, they'll actually end up falling into Chapter 7, which of course is liquidation," which means parts of the company will be sold off.
The White House's auto task force enlisted investment bankers to help GM find funding so that the company can continue to operate in bankruptcy, if necessary.
"It's unlikely, it seems, that anyone would just allow the company to fail," Langfitt says. "Not only does GM have tens of thousands of workers, but there are all these suppliers and they employ hundreds of thousands of people. So if GM were to actually just collapse, it could really deepen what's already a really bad recession."