GM reveals more SEC probes; GMAC sale looks rocky
By Sharon Silke Carty, USA TODAY
usatoday.com
DETROIT — Adding to an already long list of problems, struggling automaker General Motors (GM) disclosed Tuesday that it now is the subject of seven investigations by the Securities and Exchange Commission rather than the five it previously said.
In a filing with the SEC, GM also warned that it might not be able to sell controlling interest in its GMAC finance arm to raise emergency cash and to restore the lender's credit rating.
The money-losing automaker portrayed the disclosures as routine parts of its annual filing with the SEC. But that filing itself was delayed more than a week after GM at the last minute discovered financial irregularities at a unit called ResCap, which is part of GMAC.
At about the same time, the automaker said it would have to spend more than planned on its own restructuring and on lingering obligations to parts supplier Delphi, now under Chapter 11 bankruptcy protection. (Story: Delphi troubles threaten GM)
As a result, it added $2 billion to its losses last year, putting it $10.6 billion in the red for 2005.
Kevin Tynan, an analyst with Argus Research, said the issues trouble investors because GM's CEO, Rick Wagoner, has a background in accounting and finance.
"You're talking about a guy who came from the finance side, and if the company has anything but squeaky clean finances, that's going to raise some eyebrows," Tynan says.
In the Tuesday disclosures, GM said the SEC has issued a subpoena seeking information about precious metal transactions. Additionally, GM said, the SEC and a federal grand jury have issued subpoenas to GMAC as part of industrywide investigations into insurance industry practices.
"A negative outcome of one or more of these investigations could require us to restate prior financial results (in addition to our recent restatements) and could result in fines, penalties, or other remedies being imposed on GM," the company said in its filing.
GM has been seeking a buyer for controlling interest in GMAC. GMAC has been a cash cow for GM, but the lending unit has been hurt by its ties to the money-losing car company, making it more expensive for GMAC to raise money.
Selling off most of it would raise cash for GM and could allow GMAC to improve its creditworthiness while it continues providing loan money for purchases of GM vehicles.
Tuesday, GM warned that it might not find a buyer, and even if it does, that "may not delink GMAC's credit rating from GM's credit rating."
GM spokesman Jerry Dubrowski said, "I don't think you should read too much into that, beyond the obvious, that there's always a risk factor." |
