Auditors of key General Motors and Chrysler supplier American Axle & Manufacturing Holdings (AAM) have warned the supplier could collapse due to pressure on the automakers.
“As a result of the current automotive industry environment and the uncertainty relating to the ability of GM and Chrysler to continue operating as going concerns … it is uncertain whether we will be in compliance with the financial covenants … throughout 2009,” the company was quoted as saying in an SEC filing on Friday (13 March).
“Should [AAM] fail to be in compliance with these covenants and we are unable to obtain a waiver or amend these covenants, we may be unable to continue as a going concern.”
The report noted that AAM shares, worth as much as US$30 each in mid-2007, had been below $1 this month and fell to just 26 cents last Monday.
AAM said in a statement last week it had been warned by the New York Stock Exchange (NYSE) that it might be delisted because it had “fallen below NYSE’s continued listing standard related to total market capitalisation and stockholders’ equity.”
At the end of January, American Axle, which was originally formed by a spinoff of some of GM’s component operations, reported a net loss for 2008 of $1.2bn ($23.73 per share) – on sales of $2.1bn – due largely to $1bn in one-off charges caused by the US auto industry downturn.
US suppliers last month asked the US treasury to help the sector secure emergency funding to avoid a wave of bankruptcies and a deeper crisis in the auto industry.
Reuters noted that projections at the time by suppliers showed incoming payments were on track to drop to only $2-3bn in March because of the near total shutdown in auto production at the start of the year, according to the Motor Equipment Manufacturers Association (MEMA). Suppliers reportedly had previously been receiving $8-9bn a month.