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Wagoner: GM Won't File for Bankruptcy

DETROIT, Nov 17, 2005 (AP Online via COMTEX) -- General Motors Corp. Chairman and CEO Rick Wagoner told employees Thursday that the world's largest automaker has no plans to file for bankruptcy despite heavy losses in its North American division and the threat of a strike at Delphi Corp., its major supplier. GM shares climbed more than 6 percent, bouncing back from their lowest level in 18 years.

"I'd like to just set the record straight here and now: there is absolutely no plan, strategy or intention for GM to file for bankruptcy," Wagoner said in a letter to employees, which a GM spokesman said was posted on an internal Web site.

Wagoner said GM has a clearly defined turnaround plan and "a robust balance sheet," with $19 billion in cash and $16 billion in assets in a trust fund for retiree health care.

"The large losses at GM North America are unsustainable, for sure, and require a comprehensive strategy to address them ... a strategy that must be implemented promptly and effectively, to get our U.S. business profitable again," Wagoner said.

GM shares rose $1.34, or 6.3 percent, to close at $22.63 on the New York Stock Exchange. They had traded at an 18-year low of $20.90 during Wednesday's session and slipped as low as $20.60 in Thursday's trading before Wagoner's letter to employees was posted.

Standard & Poor's Ratings Services upgraded its opinion of GM's stock Thursday from "strong sell" to "hold," saying it doesn't expect the company to file for bankruptcy in the next 12 months. S&P said it also believes there is a low probability of a costly strike at Delphi, GM's former parts division, even though union members rejected Delphi's latest wage offer earlier this week. Delphi filed for bankruptcy protection last month.

"Although we expect high gas prices to hinder large vehicle sales, we project rebounding sales volume of these vehicles and a return to profitability in 2006," S&P said.

But GM's mounting problems are causing speculation about the future of Wagoner and other top executives. GM's U.S. market share is falling and it lost nearly $4 billion in the first nine months of this year, crippled by high health care and labor costs. It is under investigation by the U.S. Securities and Exchange Commission for accounting errors, and it also could be liable for billions in pension costs for Delphi retirees.

"If the company continues to go south the way GM is doing, it does raise questions about the confidence the board has in these people," said Gerald Meyers, the former chairman of American Motors Corp. who now teaches at the University of Michigan. "I know they are dealing as best they can, but it's just awful."

Among the investors who could call for a change is billionaire Kirk Kerkorian, who owns a 9.9 percent stake in GM. So far, Kerkorian hasn't acquired a seat on GM's board, even though the value of his investment has dropped substantially this year. For example, the 18.9 million GM shares Kerkorian purchased in June are now worth $161 million less than the $585 million he paid for them.

A message was left with a spokeswoman for Kerkorian.

Industry analyst Maryann Keller said Wagoner isn't entirely to blame for the company's woes, which "go back generations of CEOs." But she said shareholders and others will criticize management until GM takes bold actions. For example, Keller said, GM has said it will reduce 25,000 jobs and close several plants by 2008, but the job cuts are due to attrition and the plant closings haven't been announced. The company also continues to pay dividends to shareholders.

James McTevia, a restructuring expert involved in the Delphi bankruptcy proceedings, said GM's board needs to be more active and aggressive.

"I do not think they have been bold or dramatic enough about the direction in which they want take this company," McTevia said. "GM's problems are going to be solved by a lot of people, not just one."

David Cole, who is chairman of the Ann Arbor-based Center for Automotive Research and has close ties to GM, said the company's board has faith in Wagoner. He said Wagoner can't be too bold because decisions like plant closings involve delicate union negotiations. Negotiations with Delphi also are unpredictable, he said.

"Nobody controls all the levers in this one," Cole said.

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On the Net:

General Motors Corp., http://www.gm.com

By DEE-ANN DURBIN AP Auto Writer

Copyright 2005 Associated Press, All rights reserved

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As of Sunday, 11-13-2005 23:59, the latest Comtex SmarTrend(SM) Alert, an automated pattern recognition system, indicated a DOWNTREND on 11-08-2005 for GM @ $26.35.

As of Sunday, 11-13-2005 23:59, the latest Comtex SmarTrend(SM) Alert, an automated pattern recognition system, indicated a DOWNTREND on 11-10-2005 for RGM @ $15.44.

(C) 2005 Comtex News Network, Inc. All rights reserved.

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APO Priority=u APO Category=1310 (PROFILE (CO:General Motors Corp; TS:GM; IG:3300;) (CO:Delphi Corp.; TS:DPHIQ; IG:0000;) (COUNTRY:United States; ISOCOUNTRY3:USA; UNTOP:021; APGROUP:NorthAmerica;) )

KEYWORD: DETROIT
SUBJECT CODE: 1310

AP Photo DT108