Ford and GM Prep for Economic Hardship
With another global recession looming on the horizon, executives at General Motors and Ford are busy touting the merits of being prepared. On Tuesday, the financial heads of both automakers were present at a J.P. Morgan Conference in New York to explain the steps being taking to mitigate economic disaster.
While financial hardship is not yet a guarantee for the United States, the ongoing trade war with China has impacted the cost of doing global business. Likewise, most sizable automotive markets are either underperforming or have surpassed peak growth levels. Depending upon the severity of the anticipated recession, GM claims its “downturn planning” could include postponing non-essential capital expenditures and shifting toward lower-priced automobiles.
Unfortunately, neither company finds itself well positioned to make that kind of change. GM and Ford have both spent billions over the last few years on electrification, mobility programs, and data management. They’ve also ended production of many of their most affordable models to push higher-margin utility vehicles and pickup trucks.
They do, however, seem to have enough money to weather the storm for a time. According to Reuters, Ford CFO Matt Fields said the manufacturer has a cash buffer of $20 billion. Meanwhile, GM finance chief Dhivya Suryadevara said his company has $18 billion in cash with the potential to pay two years’ worth of dividends.
“It’s something that we continually keep watching and updating to make sure that we’re all set for when the downturn does come,” Suryadevara explained, adding that GM has been modeling scenarios akin to the Great Recession that bankrupted the company in 2009. She said that the automaker doesn’t foresee another recession as being a certainty but felt it was better for General Motors to be prepared.
Both automakers are also undertaking restructuring efforts involving thousands of layoffs and some shuttered factories. As a result, GM estimates it will see about $2 billion to $2.5 billion in cost savings by the end of 2019. Ford’s restructuring is presumed to result in $25.5 billion in total savings by 2022.
[Image: Sergey Akhrameev/Shutterstock]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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They're both gonna' run out of plants to close and people to fire before too long.
"My politicians are good and yours suck and are responsible for all that's wrong" - 90 percent of the posters here. I swear to God it's worse than living in Alabama during the Iron bowl (I'm not a fan of Bama or Auburn). That at least is entertaining. You idiots are trying to rip apart the country I love. It used to make me sad, but now I'm just cynical and try to profit somehow off of all the stupidity.