GM hoards cash in uncertain times
General Motors announced on Tuesday that it will draw down $US16billion from its revolving credit facilities as a proactive measure to give it financial flexibility required because of the uncertainty associated with the coronavirus pandemic.
This will also allow it to continue to pay dividends. Rival Ford has drawn down a similar amount of cash but has already said it is suspending its second quarter dividend payment.
GM’s CEO, Mary Barra, is also said to be pursuing further austerity measures alongside structural changes that have been taking place over the past few years to preserve cash. These measures are to ensure the ongoing viability of operations and to protect customers and stakeholders.
In the recent past GM cut nearly 4000 management positions and also shuttered several plants. One production facility has been sold to an electric truck manufacturer.
Analysts suggest stockpiling cash is sound thinking in times of uncertainty and that GM is well placed to ride out the economic downturn. All of the auto industry will be adversely affected by the coronavirus pandemic and the resulting recession.
Like many other majors, GM has said it is suspending its 2020 financial expectations because the exact influence of the pandemic is unclear. It depends largely on its duration as to how it impacts the global economy.
GM, Ford and Fiat Chrysler Automobiles have all shut down production at assembly plants in the short term, some expecting the shutdown to last well into April.