SEC subpoenas GM accounting records!

[Wes Bucey]

So - as you read through this article, ask yourself if anyone other than top managers at GM have the power to direct the accounting. It will be interesting to see the GM spin doctors putting a spin on this probe to make GM look like a good guy eager to help the SEC in its investigation. Will they try to blame this problem on unions, too?

GM subpoenaed in accounting probe
Wed Oct 26, 8:40 PM ET
DETROIT (Reuters) - General Motors Corp. said on Wednesday it had been subpoenaed by the U.S. Securities and Exchange Commission as part of a probe into its accounting practices and other matters.

It was the latest blow to the world's largest automaker, which is bleeding money from its core North American automotive operations and confronting its biggest financial crisis since a narrow brush with bankruptcy 13 years ago.

GM said the subpoenas related to its financial reporting for pension and other post-employment benefits, and to transactions between the company and auto parts supplier Delphi Corp. (Other OTC PHIQ - news).
They 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, the company 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 its former parts arm off in 1999. Delphi filed the largest bankruptcy in U.S. automotive history earlier this month.

GM said SEC and federal grand jury subpoenas had also 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.

GM, which has lost about $3.8 billion through the first nine months of 2005, said last week that it was exploring the possible sale of a majority stake in GMAC.

Such a sale, which could now potentially be delayed by ongoing investigations and legal wrangling, is aimed at shoring up the credit rating of GMAC which was cut -- along with that of its parent company -- to high-yield or "junk" status earlier this year.

The ratings cut has ratcheted up GMAC's massive borrowing costs, threatening its ability to continue supporting GM's automotive lending and finance operations.

In its statement, GM said both the automaker and its subsidiaries were cooperating with all the ongoing investigations. It added that the company had no further comment at this time.

GM's statement, Wednesday evening, came a day after DaimlerChrysler (DCXGn.DE)(NYSE CX - news) said it had received an SEC subpoena for information as part the Washington agency's investigation into pension accounting practices at GM.

The German automaker said in a regulatory filing that it received the subpoena in September relating to the discount rate and discount rate methodology used for accounting for pension benefits.

The issuance of a subpoena indicated that the SEC had upgraded its investigation into GM's pension accounting practices to a formal status from what had previously been described as an informal probe.

Under such formal status, which must be first approved by the SEC commissioners, staff investigators are provided with powers to subpoena a company for documents and subpoena officials to provide testimony.

SEC spokesman John Nester declined to comment on the agency's investigation into GM hours before the automaker issued its statement late on Wednesday.

(Additional reporting by Jonathan Stempel, New York, and John Poirier, Washington)

[Marc]

As Scooby says: "Rut row..."