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DETROIT – General Motors Corp.’s auditors have raised “substantial doubt” about the troubled automaker’s ability to continue operations, and the company said it may have to seek bankruptcy protection if it can’t execute a huge restructuring plan.

The automaker revealed the concerns Thursday in an annual report filed with the U.S. Securities and Exchange Commission.

“The corporation’s recurring losses from operations, stockholders’ deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern,” auditors for the accounting firm Deloitte & Touche LLP wrote in the report.

GM also disclosed Thursday that Chief Executive Rick Wagoner received a pay package worth $14.9 million in 2008, although $11.9 million of his compensation was in stock and options whose value plummeted to $682,000 as GM’s share price sank.

Reports said Thursday that President Barack Obama’s administration is working “around the clock” to shore up the struggling automotive industry. GM said in a statement Thursday that the auditors’ going-concern view has no impact on the automaker’s restructuring steps.

The automaker has received $13.4 billion in federal loans as it tries to survive the worst auto sales climate in 27 years. It is seeking a total of $30 billion from the government. During the past three years it has piled up $82 billion in losses, including $30.9 billion in 2008.

The company faces a March 31 deadline to have signed agreements of concessions from debtholders and the United Auto Workers union to show the government it can become viable again. On Feb. 17 it submitted the restructuring plan to the Treasury Department that includes laying off 47,000 workers worldwide by the end of the year and closing five more U.S. factories.

GM said in its filing that its future depends on successfully executing the plan.

“If we fail to do so for any reason, 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 Detroit-based automaker said in the annual report.

GM, the report said, is highly dependent on auto sales volume, which dropped rapidly last year. “There is no assurance that the global automobile market will recover or that it will not suffer a significant further downturn,” the company wrote.

Companies whose auditors doubt they can continue as a going concern usually are in severe trouble and in most cases head into restructuring, either in or out of court, said John Pottow, a University of Michigan Law School professor who specializes in bankruptcy.

“If you get a qualified going concern audit letter like this, that suggests you are in extreme financial distress and very likely may file for bankruptcy,” he said.

But Harlan Platt, a professor at Northeastern University in Boston who teaches about corporate turnarounds, said the auditors’ concerns don’t mean GM is headed for a bankruptcy filing. The auditors, he said, are merely stating what the world has known for months.

“A company which has borrowed $13.4 billion and has asked for billions more around the world is obviously in trouble,” he said.

Platt said the union concessions and debt restructuring laid out in the government loan terms, plus GM’s own restructuring steps that include shedding unprofitable brands, will make the company healthy again once auto sales recover from current low levels.

“I think the government has forced the hands of everybody,” Platt said. “In 18 months to 24 months, I anticipate they will be profitable, in the black — a mean and lean competitor that will be world-class.”

U.S. auto sales in February dropped to the lowest level since December 1981. Last year, automakers sold 13.2 million vehicles in the U.S., about 3 million less than the 16.1 million sold in 2007. Analysts and auto company executives are predicting sales of just over 10 million this year.

GM said in a statement that the auditor’s opinion would not affect its restructuring plan.

“Once global automotive sales recover and GM’s restructuring actions generate the anticipated savings and benefits, the company is expected to again be able to fund its own operating requirements,” the statement said.

GM has said it wants to avoid bankruptcy protection because it would scare off customers. Car buyers, the company has said, would be reluctant to buy from an automaker in Chapter 11 due to fears that it wouldn’t be around long enough to honor warranties or make replacement parts.

GM, in its viability plan submitted to the Treasury last month, said it explored three bankruptcy scenarios, all of which would cost the government more than $40 billion.

Chief Operating Officer Fritz Henderson said at the time that the government would be the only place the company could get financing for a Chapter 11 reorganization, because the credit markets are frozen. The worst-case bankruptcy scenario would cost the government $100 billion, Henderson said, because revenue would severely drop due to a lack of sales.

GM warned last month that its auditors may raise the “going concern” doubts, and industry analysts said auditors’ statements may trigger clauses in some of GM’s loans, placing them in default.

But the company said in its filing that it has received waivers of the clauses for its $4.5 billion secured revolving credit facility, a $1.5 billion term loan and a $125 million secured credit facility.

“Consequently, we are not in default of our covenants,” the report said. “If we conclude that there is substantial doubt about our ability to continue as a going concern for the year ending Dec. 31, 2009, we will have to seek similar amendments or waivers at that time.”

GM spokeswoman Julie Gibson said there is no clause in the terms of the government loans that places them in default if the auditors raise doubts about GM’s ability to keep operating.

“That was not a condition of the loan. It’s not in the agreement,” she said.

Saab has not made a profit since 2001

An administrator has been appointed to handle the process. Saab is seeking to create a fully independent business.

GM has said that it wants to sell Saab. There had been concerns about the loss-making carmaker after the Swedish government rejected GM’s call for aid. GM took a 50% stake in Saab in 1989 and gained full ownership ten years later. Any restructuring would need the approval of Saab’s creditors, who meet on 6 April.

Expressions of interest
“Today is the beginning of a new chapter in Saab’s history,” said Jan Ake Jonsson, Saab’s managing director. He also said that several companies had expressed interest in Saab, though he declined to name any.

“Even though we have not been actively searching for new partners, we have had many knocking on our door showing interest in Saab,” he said. He also revealed that creating a separate unit of Saab and German carmaker Opel, also owned by GM, had not been discussed.

Separately, the German government said that it had not received an official application for a state guarantee from carmaker Opel. The government was waiting for a plan from Opel on its future before making any decisions, a government spokesman said.

Government aid
Despite turning down GM’s request for support, a senior Swedish government official has said the government has not ruled out providing loan guarantees to Saab following its restructuring. “It is not the case that we have closed the door to that. That will depend on what the plans look like,” Joran Hagglund, state secretary at the Swedish Industry Ministry, told the Reuters news agency.

Sweden said last year that it would provide up to 25bn Swedish crowns in aid to its auto industry to help it through the economic crisis. Mr Jonsson said Saab expected to be given access to the state funds.

Saab said in a statement that the reorganisation was “the best way to create a truly independent entity that is ready for investment”. In a restructuring plan submitted to the US Treasury this week, GM had said it planned to make Saab an independent business by the start of 2010.

Loss-making
Sales at Saab in 2008 were down 25% on the previous year. The Swedish carmaker has not made a profit since 2001. In 2007

Saab's managing director said this is the beginning of a new chapter

it made an operating loss of 2.19bn Swedish crowns ($248m; £175m), according to regulatory filings.

It estimates its losses in 2008 at around 3bn Swedish crowns and expects a similar loss this year, filings also revealed.

Stephen Pope, chief global strategist at Cantor Fitzgerald, believes GM “oversaw the destruction of the Swedish car company’s soul”. “Just look at the current ‘93′ [model] as an example,” he said. “The ‘93′ is just a Saab body skin placed on top of the Vectra from Opel/Vauxhall.”

Protection from creditors
The reorganisation process is the Swedish equivalent of going into Chapter 11 bankruptcy protection in the US, providing protection from creditors. Saab has plans to launch three new models over the next year and a half. “Reorganisation will give us the time and means that help get these products to market while minimising the liquidity impact of Saab on GM,” Mr Jonsson said.

Saab said funding for the restructured company would need to be secured during the three-month reorganisation process and would be sought from both public and private sources. During that period, the company is not allowed to pay off any debts accumulated before the reorganisation was declared.

Supplier concerns

Saab employs about 4,100 people in Sweden. Thousands more work for suppliers to the company.

Responding to concerns from Saab’s supplier base, GM Europe said it would establish “a viable mechanism for the timely payment of suppliers’ claims towards Saab”.

GM added that it hoped the gesture would encourage suppliers to support Saab’s efforts to reorganise into an independent business.

Union Givebacks, Rising Market Share Are Tied to Rivals’ Bad News; Why Some Shoppers Switch to Ford

Ford Motor Co., which hasn’t taken a dime of government bailout loans, is benefiting from the troubles of its two cross-town competitors in Detroit, General Motors Corp. and Chrysler LLC.

GM and Chrysler are required to seek cost concessions from the United Auto Workers union under the terms of their federal loans. That allowed Ford to open parallel talks with the UAW, which has a history of working out the same conditions at each company.

This week, Ford and the UAW reached an agreement to cut pay for laid-off workers, ease work rules and eliminate wage increases tied to the cost of living — two days before GM and Chrysler reached the same deal.

Ford CEO Alan Mulally, left, and GM CEO Rick Wagoner at the Detroit auto show last month. Ford has been winning more U.S. customers.

At the same time, while GM and Chrysler have been hit with a steady stream of negative news — including growing concern they may need to file for bankruptcy protection — Ford has been having more success at luring away its competitors’ customers.

Ford’s share of the U.S. retail market rose in each of the past four months, while GM’s and Chrysler’s fell, Ford said.

In January, 45% of Ford buyers turned in cars or trucks of other manufacturers, up from 38% in August, according to Edmunds.com, an auto-shopping Web site. Meantime, the “conquest rate” for GM’s Chevrolet was 43% last month, down from 49% in August, and for the Chrysler brand, the conquest rate was 60% last month, down from 67% in August, according to Edmunds.

“That’s a sign that there is something definitely going on for Ford,” said Jesse Toprak, an analyst at Edmunds Inc.

For some domestic-car buyers, the bankruptcy talk has been enough to cause them to defect to Ford. John Grassi of Warren, Mich., recently turned in his leased Dodge Grand Caravan minivan and replaced it with a Ford Fusion.

“The future of GM and Chrysler certainly played a part in my decision,” said Mr. Grassi, 50 years old, who works for Warren’s parks and recreation department. “Ford seems to be the most sound in terms of staying solvent. I mean, you look at your warranty and you want that warranty to be good.”

Still, Ford has many challenges. Edmunds’s Mr. Toprak said the company is “weighed down” by the perception of many consumers that it is in the same boat as GM and Chrysler. All auto makers are suffering from the recession and credit crunch, which have sent sales plummeting. In January, Ford’s sales were down 40%. And the company continues to post huge losses, including $5.5 billion in the fourth quarter, which are eating up its cash.

Ford isn’t assuming its trend of recent market share increases will continue. “This market provides limited opportunities. You can’t will yourself to higher sales,” said Ford sales analyst George Pipas.

The terms of the government loans also require GM, Chrysler and the union to work out a way for the companies to put less cash and more stock into trust funds to cover the cost of health care for retired union workers. That has opened the door for similar talks at Ford, although no agreements have been reached yet.

Ford also is believed to be seeking concessions from its bondholders and dealers, also required by the loans given to GM and Chrysler. Ford has been less forthcoming about the state of these negotiations. But Ford Chief Executive Alan Mulally said during an earnings call last month that “I really believe from the ongoing conversations that we are having with all the stakeholders and the U.S. government that as we go through this and we continue to take the actions that we need to take that we will not be disadvantaged.”

Meanwhile, Ford seems to have made headway with customers as both GM and Chrysler nearly ran out of money over the past few months. In Centerline, Mich., Bob Thibodeau said he’s noticed more owners of other makes shopping at his Ford dealership. “We have certainly seen a lot more cross-shopping in recent months like we’ve never seen before,” he said.

Ford also may be seeing more customer traffic because it just launched a redesigned version of its F-150 pickup truck, the top-selling vehicle in the country, and its finance arm is healthier than the lenders GM and Chrysler work with, GMAC LLC and Chrysler Financial.