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GM is about to stockpile $16B in cash amid uncertainty, coronavirus outbreak

Jamie L. LaReau, Detroit Free Press on

Published in Automotive News

DETROIT -- General Motors is stockpiling as much cash as it can to guard against the uncertain fallout from the coronavirus pandemic and will consider other measures including continued payment of its dividend as it evaluates market conditions.

The automaker said Tuesday it will draw $16 billion from its revolving credit facilities as a proactive measure to boost its cash reserve. That will give GM financial flexibility because of the uncertainty in global markets.

GM is expected to have $15 billion to $16 billion in cash at the end of March, so this added money will serve as a supplement.

"We are aggressively pursuing austerity measures to preserve cash and are taking necessary steps in this changing and uncertain environment to manage our liquidity, ensure the ongoing viability of our operations and protect our customers and stakeholders," said CEO Mary Barra in a statement.

Barra noted that over the last several years, GM made strategic decisions and structural changes to transform the company and strengthen the business, "better positioning us for downturns."

About this time last year, GM cut nearly 4,000 white-collar jobs and idled its transmission plants in Warren and Baltimore as well as the Lordstown Assembly plant in Ohio. GM has since sold the Lordstown facility to electric-truck maker Lordstown Motors.

 

In addition, GM Financial (GMF) has strong liquidity and capitalization. GMF had $24 billion of liquidity at the end of last year. It expects to end the first quarter at similar levels. Its liquidity level is intended to support at least six months of cash needs, including new loan originations, without access to capital markets. GMF is managing below its target leverage ratios.

Analysts said GM is exercising good judgment at the right time.

"Everyone is stockpiling cash because it's the best way to deal with uncertainty," said David Whiston, equity strategist for U.S. Autos at Morningstar Research Services. "They are leaving themselves about $1.3 billion of availability on the credit lines so there's still a small buffer left."

Whiston noted that GM did not mention its plans for paying a dividend in its announcement Wednesday, "so I'm guessing they will try to maintain it for now. If they were going to eliminate it, today's announcement would be the time to do it."

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