updated 11/10/2005 10:41:10 AM ET 2005-11-10T15:41:10

Shares of General Motors Corp. fell Thursday one day after the world’s largest automaker said it would restate its earnings for 2001 because an accounting error led it to overstate its 2001 profit by up to $400 million.

The announcement in a filing late Wednesday with the Securities and Exchange Commission comes as the company faces a continuing regulatory investigation of its accounting practices. It has reported huge losses for the first nine months of the year, its auto sales are being pressured by competition from foreign manufacturers and it faces rising health benefit and pension obligations.

Also on Wednesday, the credit ratings agency Fitch Ratings lowered GM’s debt deeper into “junk” status.

GM shares fell $1.23, or nearly 5 percent, to close at $24.63 on Wednesday on the New York Stock Exchange, the lowest level since November 1992.

In the filing with the SEC, GM said its 2001 earnings were overstated by approximately $300 million to $400 million, but the final amount hasn’t been determined. GM plans to issue the restated earnings for 2001 and any subsequent years before it issues its 2005 annual report next year.

The Detroit-based automaker said it has been conducting an internal review of credits received from suppliers, an issue also being investigated by the SEC. The review indicates GM erroneously booked the supplier credits as income in the year they were received rather than to future periods, GM said.

GM filed its statement Wednesday evening after the markets closed. The audit committee of GM’s board warned investors not to rely on GM’s financial statements for 2001.

Fitch downgraded GM’s issuer default and senior unsecured debt ratings to BB-plus from BBB. The ratings agency said it was concerned about the costs GM might incur as its former parts division, Delphi Corp., restructures in bankruptcy court.

Fitch didn’t lower the rating for GM’s finance arm, General Motors Acceptance Corp., because GM announced last month it wants to sell a controlling interest in GMAC to a strategic partner. Fitch said it will consider lowering GMAC’s rating if GM doesn’t make progress on that sale in the first quarter of 2006.

GM has said it could be liable for up to $12 billion for benefits for Delphi employees as part of the supplier’s restructuring. Besides that financial burden, Fitch said GM also is at risk if Delphi and its unions fail to agree on wages and benefits.

“A labor disruption at Delphi for any extended period would have an immediate impact on GM’s ability to operate and would quickly reduce liquidity,” Fitch said.

GM had $19.2 billion in cash as of Sept. 30, Fitch said. The company has $31 billion in outstanding debt.

GM spokeswoman Gina Proia said the company is taking steps to restore profitability, including reaching a tentative agreement with the United Auto Workers to cut health care costs, reducing its structural costs and committing to using 100 percent of its North American plant capacity by 2008.

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