A day after General Motors Corp.’s auditors raised concerns of bankruptcy, its shares on the New York Stock Exchange plunged as much as 32 percent to levels unseen since the Great Depression.
GM shares ended Friday trading down 22 percent to $1.45 amidst more chatter that the company may have to file for Chapter 11 bankruptcy. To investors as well as auto buyers, the writing may already be on the wall—during the last 12 months, GM’s stock has dropped almost 94 percent of its value.
Officially, GM has staunchly denied any plans of bankruptcy. The company has publicly stated the belief that its restructuring efforts would succeed, and a bankruptcy filing can be devastating to its brand perception.
"As a prudent business measure, the company has analyzed various bankruptcy scenarios," GM said in a Friday statement. "However, the company firmly believes an in-court restructuring would carry with it tremendous costs and risks, the most significant being a dramatic deterioration of revenue due to lost sales."
“The company has established a clearly-defined plan to restructure its business and restore GM to long-term viability,” it said. The company announced the statement in response to a Friday Wall Street Journal article which quoted an unidentified source that GM may be considering a quick bankruptcy reorganization.
GM and fellow Detroit automaker Chrysler LLC have already received $17.4 billion in federal financial aid. The companies have asked a newly formed governmental automotive panel for a new bailout.
Last week, in a SEC filing, GM’s auditor Deloitte said that there’s “substantial doubt” that GM could remain in business. Almost immediately, GM company officials voiced their opinions on the company’s official blog, GM FastLane.
Steve Harris, GM Vice President, said that the company expected the auditor’s opinion given GM’s recent need for federal funding, consecutive quarters of net loss, and its own public statements.
However, “the company has established a clearly-defined plan to restructure its business and restore GM to long-term viability,” Harris said on the blog. “We acknowledge the challenges and risks that face us today, but we’re still going forward with our plan, we’re still making the best cars we’ve ever built, and we’re still rebuilding our company for long term viability.”
Last week GM announced that its February monthly sales are down 52 percent from the same month last year.
As the Larry Summers-led federal panel mulls further bailout for the auto industry, some have already voiced their support for the troubled company.
"I think the biggest thing is that we've got to get people to not be afraid to start spending money again. That's the only way the economy is going to recover—to get people confident that they can start spending money again," said Tony Stewart, a NASCAR driver, in a statement from NASCAR.
"The good news is that GM is doing its part with Chevy brands. They're building cars that are affordable and efficient. From the manufacturer's side, that's all you can ask for,” Stewart said, perhaps suggesting that it is up to the government to provide further support.
President Barack Obama’s advisors on the auto industry, Ronald Bloom and Steve Rattner, plan to visit Detroit this week and talk with company executives at GM and Chrysler.
"I’m glad they are going. What they will see is a highly modernized auto industry that can compete with the rest of the world if we do what the governments of the rest of the auto- producing countries in the world are doing," Sen. Carl Levin (D-Mich.) said in a statement.