NEW YORK, 12 October 2005 — A Wall Street analyst yesterday warned that General Motors has a 30 percent chance of filing for bankruptcy following a weekend of further turmoil in the Detroit motor industry including the bankruptcy filing of GM’s largest parts supplier, Delphi.
The filing means that GM, which spun off Delphi in 1999, could be liable for up to $11 billion in healthcare and pension benefits for workers who transferred to the parts supplier. It also faces possible supply disruptions. Shares in GM fell more than 4 percent to $27.08.
GM, the world’s largest carmaker, has been struggling with competition from Asian rivals, rising raw material costs and a fall in sales of its high-margin sports utility vehicles.
The biggest problem, though, is soaring healthcare and pension liabilities for its American workers.
The company posted a loss of $2.5 billion in its North American operations in the first half of 2005.
Ronald Tadross at Banc of America Securities changed his rating on GM from neutral to sell. He said the Delphi filing had lifted the possibility that GM might enter bankruptcy in the next two years from 10 percent to 30 percent.