DETROIT — General Motors is withdrawing its 2020 financial guidance and doubling its cash reserve by borrowing $16 billion (all figures USD) from existing credit lines as it weathers the coronavirus pandemic, the automaker said Tuesday.
The action will improve GM's cash position and preserve financial flexibility in uncertain global markets. The automaker had expected to have a cash position of about $15 billion to $16 billion at the end of March.
"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," CEO Mary Barra said in a statement. "Over the past several years, we have made necessary, strategic decisions and structural changes that have transformed the company and strengthened the business, better positioning us for downturns."
GM shares, which have fallen by nearly half in the past month, rose more than five per cent in premarket trading Tuesday.
GM's statement did not address any plans to change the company's dividend payout. GM paid its first-quarter dividend of 38 cents per share March 20, spokeswoman Juli Huston-Rough said.
"We have about a month before we would typically declare our Q2 dividend," she said. "We will evaluate how the macro backdrop evolves before deciding."
GM Financial, the automaker's captive finance arm, had $24 billion of liquidity at the end of 2019 and expects to end the first quarter at similar levels, the statement said. Its liquidity level aims to support at least six months of cash needs, including new loan and lease originations, without access to capital markets.
"GM Financial has prepared for times like this by maintaining a strong financial position and ready access to cash. We are confident that we will be able to navigate the challenges created by this environment without capital from GM," GM Financial President Dan Berce said in the statement.
Ford Motor Co. last week opted to suspend its cash dividend and borrow an additional $15.4 billion to max out its credit lines. It also withdrew its 2020 financial guidance.