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GM denies accounting problems
By:
Jeremy Grant
Shares in General Motors, the biggest US motor manufacturer, were briefly suspended on the New York Stock Exchange on Thursday amid rumours - strongly denied by the company - that it was subject to unspecified accounting problems. GM said: "There's some kind of a rumour out there which is unfounded. We are not subject to an accounting investigation and we strongly believe that our accounting is appropriate." Investors, already unnerved by revelations of apparent accounting fraud at WorldCom, sent GM shares down $1.08 to $52, or about 2 per cent, in midday trade once trading resumed. The shares earlier hit a low of $51.50. General Motors in the midst of an aggressive vehicle sales drive, fuelled by zero-financing and other incentives, in an effort to generate cash. The company says it needs to maintain the pressure on sales because of the damage done to its balance sheet by sagging equity markets, which have left its pension liabilities underfunded. In an interview with the Financial Times last week, Rick Wagoner, chief executive, acknowledged that bolstering GM's balance sheet was the company's single biggest challenge. "Frankly, the negative returns of US equity markets in 2001 really put the pressure on the pension fund," he said. Industry analysts calculate that if GM's return on pension fund assets is 8 per cent - as opposed to its own assumed return of 10 per cent - the size of its pension shortfall could increase by almost $8bn. Its balance sheet could be further weakened by healthcare obligations, which are forecast by Goldman Sachs to increase by $3.8bn by 2005. GM is hoping for approval from US regulators for the sale of Hughes, its communications and satellite arm, to US media group Echostar. If cleared, the transaction could bring a $14bn gain for GMFAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Action on Aging distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.
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