Is GM a ‘Going Concern’?

Do I love this?

Last week I wrote that I thought that GM’s auditors would be faced with a quandary: they are obligated to tell the company’s shareholders whether the company is a ‘going concern’. Auditors hate being in this position because the mere suggestion of doubt is often enough to tilt the company over the edge and into bankruptcy court. An ambiguous audit report can be the trigger for creditors to start to pull out their money, or attempt to renegotiate loan terms. Given GM’s losses and the speed with which it is burning through cash, I wrote that it was becoming inevitable that its auditors would have to issue the dreaded warning.

Well now. A week later, here’s today’s New York Times reporting that this is exactly what is going on. The shareholders have been told that there is considerable doubt about the company’s ‘ability to continue as a going concern’: Auditors Raise Doubts about G.M.’s Viability

Wow. All those boring years as an auditor taught me something.

Anyway please permit me to bask in my entirely unjustified self-satisfaction.

But not for long. The bankruptcy of GM will send a cascade of job losses and factory closings through communities that are already in dire straits. While I cannot feel sorry for the company itself, badly managed and poorly served by all its stakeholders including short sighted unions, I sympathize deeply with the families and the towns whose lives will be hugely affected by any restructuring.

It is within the context of the impending economic disaster for those regular people that the news of GM’s CEO having his pay cut to a mere $5.5 million in 2008 provides us with a graphic example of why Obama’s budget is so important. Something has to ameliorate the insult to working folks. Rick Wagoner just earned $5.5 million for destroying GM, and some people find it inappropriate to increase funding to unemployment insurance, or to extend health care coverage to poor kids.

That’s a statement about our priorities.

They were wrong for too long.

And I hate being right about GM precisely because of the harm its failure will do to thousands of ordinary people.

So. Perhaps I don’t love this after all.