GM says bankruptcy a possibility
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TEXT OF INTERVIEW
Bill Radke: General Motors is coming right out with its mortal fears. GM said this morning in an SEC filing that bankruptcy is a real possibility if it cannot stop the financial bleeding and generate some cash. The company has already gotten $13 billion in federal loans and it’s seeking a total of $30 billion.
Paul Eisenstein follows the auto industry for TheDetroitBureau.com. Paul, what is GM saying today?
Eisenstein: What GM is saying is actually what its auditors are saying, and that is that they have substantial doubts about the automaker’s continued viability. This is probably what the worst critics have been saying and what they have feared most inside GM.
Radke: Substantial doubts — what does that statement mean for the auto industry?
Eisenstein: Now, that’s a big question. Exactly how you interpret that is unclear, and we’re sure to hear GM try to put a spin on that over the next day or so, especially as they continue to push for the next trench in their bailout here and more money coming from overseas government to save their European operations. But clearly, what it seems to say is that in a continuing downturn, where the market cost them another 50 percent drop in sales last month, it raises questions about whatever they do being enough to survive.
Radke: Do we have any more clues now as to what GM will do to try to live?
Eisenstein: Well, we know that GM is going around the world at this point begging for cash. They have put in for multibillion-dollar bailout in Europe. They’re going to take it anyway they can, whether it comes from the E.U. government, the Germans, the Spanish, the British — heck, I was willing to drop a Esuro in while I was over there for the Geneva show, if it would help.
Radke: Haha. Paul, we just bailed out AIG this week, again. What are the chances we’re going to put more money into GM?
Eisenstein: I think that there is probably support from the Obama administration, because they eralize that letting GM fail is, first of all symbolic, much like Lehman Brothers was last year. To let GM go down, which could have a huge domino effect, is something this administration clearly fears?
Radke: So what could be the last straw, then, to kill GM?
Eisenstein: Well, it’s clear that if GM does not get the bailout from the Obama administration, the additional cash it wants, it can’t survive. But at this point, it is in a situation where there’s a lot of other things that could really cripple it. If it doesn’t get the bailout in Europe, its European operations go down — about 300,000 jobs. And when you lose that big a chunk of your empire, it becomes increasingly difficult for even the core here in North America to survive. So right now, GM has to convince a lot of people that the auditors may have doubts, but that it can survive. And it’s becoming much more difficult by the day.
Radke: Paul Eisenstein with TheDetroitBureau.com. Thank you.
Eisenstein: Good to be with you.
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