Shares of General Motors Corp., already hurt by $3.8 billion in losses so far this year, fell again Thursday after the company said the U.S. Securities and Exchange Commission had issued subpoenas as part of a probe into its accounting practices and other matters.
The news led to speculation in Asia overnight that the world’s largest automaker could file for Chapter 11 bankruptcy protection from its creditors.
GM firmly denied the rumor, but its bonds also took a hit in morning trading.
“What we’re saying is the rumor is absolutely false. We are not preparing a bankruptcy filing,” GM spokeswoman Toni Simonetti said. “It’s bad information, a bad rumor, and shame on the people who continue to spread it,” she said.
“Our financial performance is unacceptable, we know that and we’ve been working hard to turn around North American operations to improve our financial performance,” Simonetti added. “While we have a lot of work to do and a lot of initiatives under way, bankruptcy is not one of them.”
Markets were shaken earlier this year when GM had its debt cut to high-yield or “junk” status by the rating agency, Standard & Poor’s.
Pension accounting probed
The automaker, which is losing money from its core North American automotive operations and confronting its biggest financial crisis since a narrow brush with bankruptcy 13 years ago, took another blow Wednesday when it announced the escalation of an SEC probe into its accounting.
GM said the subpoenas are related to its financial reporting for pension and other post-employment benefits, and to transactions between the company and auto parts supplier Delphi Corp.
The subpoenas also relate to the SEC’s interest in GM’s recovery of various costs from suppliers and supplier price credits, and any obligations to fund pension and post-employment benefits costs related to Delphi’s Chapter 11 bankruptcy proceedings, GM said in a statement.
GM, Delphi’s former parent, has said it could be on the hook for up to $12 billion in benefits at Delphi because of guarantees it offered when it spun off its former parts arm in 1999. Delphi filed the largest bankruptcy in U.S. automotive history earlier this month.
GM said the SEC’s and federal grand jury subpoenas also had been served on entities linked to its finance arm, General Motors Acceptance Corp., in connection with insurance industry probes into products that may help companies smooth earnings.