By on April 27, 2020

 

Ren Cen. GM

Burning through piles of cash as plants sit idle, sales plummet, and the bulk of its vast workforce still demands payment during the virus-borne production shutdown, General Motors is taking new measures to protect its finances.

On Monday, the automaker announced a number of steps designed to anger shareholders in the short term, but a production restart date remains as elusive as before.

First off, the company’s quarterly dividend and stock buyback is scrapped, helping keep the company’s cash where it wants it, and a three-year, $3.6 billion revolving credit agreement is now extended until April 2022.

“This complements the extension of the $2 billion 364-day revolving credit agreement to April 2021 that GM and GM Financial renewed earlier this month,” the automaker said in a release.

While stockholders will miss that dividend, GM Chief Financial Officer Dhivya Suryadevara offered up some fiscal solace, stating, “Fortifying our cash position and strengthening our balance sheet will position the company to create value for all our stakeholders through this cycle.”

In late March, the automaker announced a deferred payment plan for its white collar employees and the furlough of around 6,500 U.S. workers.

GM didn’t take the opportunity on Monday to update the public on its production restart preparations; those hit the back burner last week after UAW President Rory Gamble issued a statement saying it was too dangerous to worker health to go ahead with an early-May restart. Gamble’s statement came as media reports pointed to early moves to get plants back online.

“We have not done enough testing to really understand the threat our members face,” Gamble said. “We want to make sure the scientific data is supportive and every possible health protocols and enhanced protections are in place before UAW members walk into the workplace.”

GM’s stock sank about 2 percent in early Monday trading.

[Image: General Motors]

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16 Comments on “Coronavirus Marches On; GM Tightens the Purse Strings...”


  • avatar

    what hits 10 first, share price or market share?

  • avatar
    Art Vandelay

    Can’t be paying dividends and buying stock back when you are about to get another bailout. Bad optics.

    • 0 avatar
      Lorenzo

      No need for a bailout. The last one was because the credit market was frozen. The extension of GM’s credit line in dollars and years is a sign the feds will just pump cash into the economy to keep the credit market flush. The next bailout will come when the debt load is too high to pay back.

      • 0 avatar
        bd2

        And b/c activist investors forced GM to do 2 share-buybacks in the years before the crash, which depleted GM’s cash reserves.

        Right now, GM is in much better shape than Ford.

        Ford spent $60 million paying its top 6 execs when its net profit in 2019 was $47 million.

  • avatar
    Peter Gazis

    Ventilator & PPE production were test runs on how to keep workers safe in a factory environment.
    GM should follow up with a test restart at one of its vehicle plants. I would suggest Flint MI because of it’s close proximity to Detroit, GM & Union officials should be able to keep a close eye on operations. If the test looks like it’s succeeding, GM should then expand the test to cover more plants. Eventually covering all of its factories. If it fails this was only a test.

  • avatar
    redgolf

    GM should wait until a non union plant goes back to work for a test restart, I’m sure Bill Lee of Tennessee is eager to do so with Nissan, before GM opens up the Spring Hill plant!

    • 0 avatar
      Lou_BC

      @redgolf – Red state restart. It has a great political slogan ring to it. Why don’t those who believe all of this is fake or over-hyped step forward and prove the rest wrong? As the saying goes, put your money where your mouth is.

  • avatar
    conundrum

    Yes, GM just informed the plebs buying their trucks that Mary Barra’s compensation has been cut back to $21.6 million from $21.9. Gotta share the pain. And the daredevil GM exec earns every penny navigating the behemoth through the Covid-19 shoals to a rocky shore.

  • avatar
    redgolf

    How about them Ford execs eh? – Ford counts its cash
    amid pandemic after $70M exec pay exceeds company’s
    profit in 2019
    https://www.freep.com/story/money/cars/ford/2020/04/27/ford-executives-salary-covid-19-strangles-economy/3027184001/

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