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GM: Substantial doubt over ability to be going concern

Last update: 6:23 a.m. EST March 5, 2009

-- General Motors (GM 2.20, +0.21, +10.6%) said in a 10-K filing that there's substantial doubt over its ability to continue as a going concern. Its auditor, Deloitte & Touche, also expressed those doubts. GM had previously flagged that a review of whether it was viable would come in the 10-K filing. "Our independent public accounting firm has issued an opinion on our consolidated financial statements that states that the consolidated financial statements were prepared assuming we will continue as a going concern and further states that our recurring losses from operations, stockholders' deficit and inability to generate sufficient cash flow to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern," GM said. "If we fail to [execute the Viability Plan successfully], we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code." The plan is contingent that vehicle sales will decline further in 2009 but begin to recover in 2010.

[Josh_Emerton]

Question: 10-K?

I get the rest.

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Wal-Mart posts February sales, hikes dividend

Last update: 11:40 a.m. EST March 5, 2009NEW YORK -- Wal-Mart Stores Inc. on Thursday posted better-than-expected February sales results, boosted by value-seeking shoppers, and hiked its dividend by 15%.
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WMT) , a component of the Dow Jones Industrial Average, rose 4.7% to $50.74.
The Bentonville, Ark.-based retail giant raised its annual payout to $1.09 a share from 95 cents, with a 27.25-cent quarterly payment.
Wal-Mart said that February sales at stores open at least a year jumped 5.1%, more than double the 2.4% average increase expected by analysts surveyed by Thomson Reuters. Sales rose 5% in the U.S. and climbed 5.9% at Sam's Club, both beating Wall Street expectations.
Overseas comparable sales fell 11%. Excluding the impact of currency translations, Wal-Mart's international sales would have risen 9.9%.
The company's results helped U.S. retailers to deliver in February their best sales performance in five months, with total sales flat compared to the original projection of a drop of as much as 2%, according to the International Council of Shopping Centers.
Excluding Wal-Mart, February's same-store sales would have dropped 4.1%, according to ICSC. See full story on retail results.
With its "Save Money. Live Better" tagline, Wal-Mart has been able to bolster traffic and win shoppers who are facing rising job losses and the global recession. The company credited declining gas prices, which significantly boosted household disposable income.
Gasoline prices have declined from a peak of more than $4 a gallon in July to $1.80 in January, according to Energy Information Administration statistics.
While benefiting from the current environment, Wal-Mart has also been able to attract shoppers through its efforts to revamp stores and add products, such as Apple Inc.'s (AAPLApple Inc
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AAPL) iPhone and exclusive apparel lines like l.e.i., investors and analysts said.
"Wal-Mart recognized very early on that consumers are changing," said Peter Kwiatkowski, who helps manage billions in assets at Fifth Third Asset Management, which owns retail stocks including Wal-Mart. "They are being very aggressive. They've become more efficient and partnering with vendors more. They've got things [such as iPhone] that are creating a little bit of the buzz. They continue to be the low-price leader."
In comparison, rival Target Corp. (TGTtarget corp com
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TGT) posted a 4.1% drop in same-store sales. The company has been hurt by its heavier exposure to discretionary merchandise and consumers' perception that its products are pricier than those at Wal-Mart. Target is also increasingly touting value and adding more food to its product mix. Its shares declined 2.2%.
At Wal-Mart U.S., grocery, health-and-wellness items and entertainment led the sales gains, with home products and hard-line goods also posting positive results. At Sam's Club, sales were driven by fresh food, dry grocery and consumables. Shoppers who are dining and entertaining more at home also lifted sales of housewares, while furniture, jewelry and other large-ticket items remained soft, Wal-Mart said.
Outside the U.S., Wal-Mart is expanding its everyday low-price pitch in Japan and increasing its supercenter growth in Canada.
Sales at ASDA in the U.K. remained strong, with food continuing to outperform, Wal-Mart said.
In Mexico, the retailer's comparable sales rose 4.7%. They turned slightly negative in Canada as shoppers focused on necessities and avoided buying discretionary items in apparel, home and shoes.
Japan and Brazil also showed positive same-store-sales increases, Wal-Mart said.

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Ford Motor Co on Wednesday announced a plan to cut its $25.8 billion in automotive debt by about 40 percent by offering creditors cash and new shares as it looks to slash financing costs at a time of plunging sales and tight credit.

Ford shares declined 15 percent after the announcement of the plan to cut its debt by up to $10.4 billion, which could increase the number of shares outstanding.

But the bonds of Ford's finance arm jumped after the launch of the tender offer. Ford Motor Credit Co's 7.375 percent bond due 2011 rose 3.5 cents to 62 cents on the dollar, according to MarketAxess.

Following Ford's announcement, Standard & Poor's cut its corporate credit rating on Ford to "CC" from "CCC+", calling it a distressed debt exchange, while Fitch said it will not affect the current rating of "CCC".

Fitch said it would view the offers as "a mild positive" to the company's credit profile.

S&P said its downgrades do not reflect an increase in Ford's risk of bankruptcy.

Ford's plan represents an attempt by the second largest U.S. automaker to win the same kinds of concessions being negotiated by rivals General Motors Corp and Chrysler LLC while steering clear of the bankruptcy-like process its rivals face under the terms of their government bailouts.

Despite the plans for new share issuance, the debt restructuring would leave the Ford family with its controlling stake in the automaker under separate Class B preferred shares. The voting interest of those shares will not be diluted.

Ford said it was making up to $2.2 billion cash available for the debt restructuring, which included conversion of debt to equity and two cash tender offers.

The automaker is paying out between 30 cents and 55 cents on the dollar as incentive to covert its debt.

Ford has the potential to restructure up to $10.4 billion of debt, given the cash available and the prices, it said.

The automaker's announcement is the latest step to bolster its finances and to maintain funding to complete a turnaround without seeking U.S. government loans.

BOLSTERING ITS BALANCE SHEET

Ford had earlier reached an agreement with the United Auto Workers union on contract changes to reduce its labor costs.

The UAW also had agreed to accept up to half of required payments to a union retiree healthcare trust, called VEBA, in stock, providing Ford with additional liquidity.

The UAW agreement is contingent on Ford pursuing restructuring action with other stakeholders, including debt reduction.

"If the above measures are successfully executed, Ford's debt and VEBA obligations would be materially reduced, providing the company with significantly greater financial flexibility to weather the severe global automotive downturn," DBRS ratings agency said in a statement.

Ford said it will pay a premium in cash to persuade holders of its 4.25 percent senior convertible notes due December 15, 2036, to convert to Ford's common stock.

If all the convertible notes were tendered, Ford would have a full-year improvement of about $208 million in continuing operations, however the number of shares outstanding would increase by about 531 million, the automaker said in a regulatory filing.

Assuming all the notes were tendered, Ford would have a pretax gain of $1.7 billion that would affect second-quarter results, according to the filing and based on the closing stock price of $2 on February 27.

That also would raise the number of outstanding shares to about 2.856 billion, from 2.325 billion.

Separately, Ford's finance arm began a $1.3 billion cash tender offer for the automaker's unsecured, non-convertible debt securities, and another $500 million cash tender offer for Ford's senior secured term loan debt.

Ford also announced its intent to exercise its right to defer future dividend payments on the 6.50 percent cumulative trust preferred securities of Ford Motor Company capital trust II beginning in April.

Separately, the New York Stock Exchange said it will suspend trading in Ford's former parts subsidiary Visteon Corp and move to remove it from its listing.

The NYSE said the company had previously been notified that it had fallen below the NYSE's continued listing standard for average closing price of less than $1 over a consecutive 30 trading-day period.

The common stock of Visteon would be suspended prior to the opening on Friday, NYSE said.

Visteon, which gets a third of its revenue from Ford, warned last week it was in danger of breaching its debt covenants as it posted its 10th consecutive quarterly loss.

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General Motors Corp said on Friday that it still prefers to restructure the business out of court rather than file for bankruptcy reorganization.

"GM has not changed its position on bankruptcy," the company said in a statement. "Restructuring the business out of court remains the best solution for GM and its constituents."

GM shares fell as much as 32 percent on Friday on the New York Stock Exchange after sliding 15 percent on Thursday when the automaker's auditors raised doubts about the company's ability to survive outside bankruptcy.

The shares were down 21.51 percent at $1.46 in afternoon trading on the NYSE.

The No. 1 U.S. automaker, which is seeking up to $30 billion in U.S. government aid, reiterated that it has analyzed various bankruptcy scenarios.

"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," GM said.

GM has previously said that a bankruptcy filing could force a liquidation because of the financing its reorganization would require and consumer reluctance to buy vehicles from a bankrupt automaker.

The automaker, which lost nearly $31 billion in 2008, faces an end-of-March deadline to complete concession talks with the United Auto Workers and bondholders to reduce its debt load as part of a bid to convince the autos task force assembled by U.S. President Barack Obama that it can be made viable with a new round of government help.

Representatives of GM's bondholders met on Thursday with the U.S. autos task force. Under GM's bailout, its debt holders have been asked to take a payout of one-third of the $27 billion GM owes through a debt-for-equity swap.

Gimmecredit analyst Shelly Lombard said the task force is unlikely to extend the deadline.

If "the auto task force got the sense that GM and its bondholders can't come up with a deal like Ford's, we expect the task force to push GM into bankruptcy rather than push back the deadline," Lombard said in a research note. "We'd expect the government to provide a DIP loan backstop rather than allowing a free-fall bankruptcy that could lead to GM and supplier liquidations."

Ford Motor Co announced on Wednesday a plan to cut its $25.8 billion in automotive debt by about 40 percent by offering creditors cash and new shares.

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BERLIN/FRANKFURT - Europe called for clarity on crisis-hit carmaker General Motor Corp's plans for assets in the region, with a German minister saying insolvency could be an option for Opel.

As turmoil sweeps the sector, Continental AG's chairman quit in a row with its biggest shareholder, Schaeffler.

With carmakers dragged down by a sales slump, the future of GM's European assets, especially German brand Opel, remained up in the air. German Interior Minister Wolfgang Schaeuble said Opel should not rule out an insolvency filing.

"The public perception is that insolvency is associated with going bust or bankruptcy. But that is wrong," he said in a newspaper interview. "We must grasp that to survive such a crisis, modern insolvency rules are a better solution than the state taking a stake".

GM's Swedish brand Saab has already sought protection from creditors.

GM Europe submitted a rescue plan for Opel last week under which the German unit along with UK-based Vauxhall would be partly spun off. It said the independent unit would need 3.3 billion euros ($4.2 billion) in state aid.

German Economy Minister Karl-Theodor zu Guttenberg met Opel and GM executives on Friday and said it will take several weeks to decide whether to give state aid.

A spokeswoman for GM UK said the group would be in contact with the British government about its potential role in the future of Vauxhall, which has 5,000 workers in two plants and which has so far insisted it does not need cash from the state.

The British government pledged 2.3 billion pounds ($3.3 billion) in loans to its car industry earlier this year, but manufacturers and industry bodies have complained they have not been told how to access the cash.

The industry is due to meet Business Secretary Peter Mandelson next week in an open seminar to discuss the issue.

LASHING OUT

The European Union's executive had on Thursday called for a meeting of member states affected by GM, saying the carmaker was not informing the bloc of its problems.

GM Europe's senior labor leader, Klaus Franz, lashed out at management, accusing executives of outbidding each other on job cut targets and scaring away politicians who didn't want to be seen using taxpayer money to fund large-scale staff reductions.

Elsewhere Hubertus von Gruenberg resigned as chairman and supervisory board member of automotive supplier Continental, after the board met to discuss its future with controlling shareholder Schaeffler.

Schaeffler, whom von Gruenberg had served with in the past as an adviser, took a direct stake of almost 50 percent in Continental and transferred another 40 percent to banks to ensure it remains a minority shareholder under a deal it struck last year to end a bitter takeover row.

But the deal blew a 6 billion euro hole in its balance sheet, just as it needs to make a 900 million euro interest payment this year on the syndicated loan financing the deal, and the family owners stand to lose control of the group.

Von Gruenberg, who was expected to supervise and accompany the carve-out of Conti's Rubber Group, attacked Schaeffler after his last board meeting as chairman.

"In my opinion, Schaeffler's conduct has clearly violated the spirit of the investor agreement reached between the two companies," he told reporters.

GRIM PICTURE

Continental said labor representative Werner Bischoff, its deputy chairman, would lead the board until a new chairman can be elected. Schaeffler adviser Rolf Koerfler had been slated to become chairman, though this was held up by a court injunction.

Germany's Robert Bosch said it was not in talks to buy part or all of Schaeffler, after a newspaper report said it had signaled interest in Schaeffler's profitable industrial business.

February volumes at Daimler's passenger car business underlined the grim industry picture. Mercedes-Benz Cars reported a 25 percent decline in unit sales.

In a further sign of the turbulence affecting automotive suppliers as new car demand plummets, at least three major tire makers canceled long-term contracts to buy Indonesian rubber.

Dealers said SMPT, the rubber purchasing arm of Michelin, Yokohama Rubber and Continental AG told suppliers they had to abandon the contracts.

U.S. parts maker BorgWarner Inc said it would suspend its 12 cents-per-share quarterly dividend to maintain financial flexibility while the economy remains mired in a slump.

South Korea's number two automaker Kia Motors Corp said it planned to issue 400 billion won ($384.3 million) worth of three-year bonds with warrants to shore up its balance sheet.

[Lancerlot]

you gotta love Cash!!!!