Why GM flunked its audit

After General Motors’ annual report Thursday, including a Deloitte & Touche audit, said Megan McArdle in The Atlantic online, it's clear GM is headed for bankruptcy. The automaker has already “burned through” $13.4 billion of taxpayer money, and wants $30 billion more, but that would buy "another year, at best.” Cars aren’t like food—strapped households “can certainly drive the 2001 Grand Caravan for another year.”

GM’s auditors did say there's “substantial doubt about its ability to continue as a going concern,” said Douglas McIntyre in BloggingStocks. But as anyone who has spent time reading SEC filings knows, “companies get these notes all the time.” The “going concern” warning makes “good headlines, but it does not mean a thing.”

“That statement may have been routine business for GM’s auditors,” said David Welch in BusinessWeek online, but that doesn’t make it any less true. GM is hoping to use the federal money to ride out the recession, but its recovery plan is based on “inflated” bubble-era assumptions about new-car sales. We’re not going to buy 16 million new cars a year again anytime soon.

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Even GM implicitly acknowledges now that, without more federal cash, it’s “on a one-way street to some kind of bankruptcy,” said Daniel Howes in The Detroit News. The question is, what should the Obama administration do? Rebates for used-car trade-ins? Tax breaks for car buyers? GM may be “the industry’s leading basket case,” but if it fails, it “won’t go alone.”