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.
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.
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.
"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.