Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

GM says no to bankruptcy

The troubled automaker issues a statement saying that it is not considering bankruptcy, after its shares sank 31% in Thursday trading.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Peter Valdes-Dapena, CNNMoney.com senior writer


NEW YORK (CNNMoney.com) -- General Motors is not considering bankruptcy, the company said in a prepared statement Friday. The announcement was in response to the automaker's precipitous stock price decline the previous day, a spokesman said.

"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," a company statement said.

"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 said.

GM (GM, Fortune 500) shares dropped 31% Thursday, ending the day at just $4.76, the stock's lowest price since 1950. The stock bounced back 13 cents, or 2.7%, Friday to close at $4.89.

Deteriorating outlook

On Thursday, Standard & Poor's Ratings Services placed its ratings for GM under review for possible downgrade. S&P said the move reflected the weakening of automotive markets across the world and expectations that tight credit markets will make things tough for the foreseeable future.

S&P said it believes GM has enough cash for at least the rest of 2008, but rapidly worsening industry conditions will make things tough in 2009.

Also yesterday, J.D. Power & Associates issued a report projecting an even faster decline in U.S. and world auto markets than the market research firm had recently thought. J.D. Power expects U.S. light-duty vehicle sales to be 16% lower this year, at 13.6 million units, than in 2007. The U.S. auto market will deteriorate even more rapidly in 2009, J.D. Power predicted, while various global markets will either decline or grow much more slowly.

GM has depended on international growth to offset some of the sales declines in its home market.

The company's statement denying that it would file for bankruptcy was clearly needed, said David Healy, an analyst with Burnham Securities.

"I suppose the way the stock has acted, they had to say something," he said.

A GM spokesman dismissed a Friday report by the Associated Press that cited unnamed sources who said the automaker was likely to announce more production cuts and possible plant closures as early as next week.

The company had previously said it would make cuts in engine, transmission and metal stamping operations. Those cuts were related to closures of plants producing trucks and SUVs, vehicles which have seen sharp declines in popularity in the face of high gas prices and a slowing economy.

GM is not planning any cutbacks beyond that, said spokesman Mike Meyerand.

Ford (F, Fortune 500) shares also saw a steep drop Thursday, closing down 22% to $2.08.

"While we are always disappointed to see our stock value drop, the most important thing we can do for all of our stakeholders is to focus on our tranformation plan," Ford said in a statement Friday.

On Friday the stock rose almost 8% to $2.25. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
How to enjoy Paris like a local Leave the tourist trail behind and enjoy wine, gastronomy, perfume, art, dance like a Parisian. More
Playboy founder Hugh Hefner through the years Cultural icon Hugh Hefner pushed barriers with his controversial Playboy magazine. He died at the age of 91. More
5 innovators: How we deal with stress The founders of companies like Allbirds, Robinhood and Paperless Post talk about how they deal with stress. More