Can General Motors survive?

GM's annual report filed with the US securities and exchange commission (SEC) included this chilling statement: "There is substantial doubt about our ability to continue as a going concern."

Given the billions of taxpayer dollars being poured into GM, the relevant paragraph from the company's filing is worth a closer look:

Our independent public accounting firm has issued an opinion on our consolidated financial statements that states that the consolidated financial statements were prepared assuming we will continue as a going concern and further states that our recurring losses from operations, stockholders' deficit and inability to generate sufficient cash flow to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern.

Such ominous sounding language is not used lightly or casually, but is required by accounting rules. If a company doesn't have the cash to make it to the next month or the next quarter, investors expect management to tell them so. And a company's auditors are expected to force management to offer such an admission, even when they would rather not. Auditors who sign off on filings that fail to offer such a caveat when clearly warranted risk sanctions themselves.

Read full article in Guardian

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