Bankruptcy

GM: Bankruptcy Not an Option

Current "unprecedented challenges" aren't reason enough, and speculation about a GM bankruptcy is "exaggerated," the company says.
Stephen TaubOctober 10, 2008

Aiming to reassure investors, customers, dealers, and creditors, General Motors said today that it is not considering bankruptcy protection.

“Clearly we face unprecedented challenges related to uncertainties in the financial markets globally and weakening economic fundamentals in many key markets, but bankruptcy protection is not an option GM is considering,” the company said in a statement.

“Bankruptcy would not be in the interest of our employees, stockholders, suppliers or customers, and we believe speculation about a possible filing is exaggerated and unconstructive,” it added.

A GM spokesman told cnn.com that the statement was in response to the company’s huge stock drop Thursday, which rocked the overall global markets, after Standard & Poor’s placed its ratings for GM under review for possible downgrade.

Barclays Capital this morning lowered its price target on the stock to $4, noting that with auto sales stalled in the United States and beginning to contract in the rest of the world, GM’s cash needs are increasing.

“Moreover, the downside risk of greater decline in worldwide auto sales driving greater cash needs is increasing,” Barclays said in a note to clients. “At the same time, credit market conditions appear to be weakening confidence that GM will be able to raise, absent additional government intervention, additional cash.”

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