Added on March 31, 2020  The News Wheel   , , , ,
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GM’s Balance Sheets Ready For COVID-19 Impact

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Mary Barra
General Motors CEO and Chairman Mary Barra
Photo: Fortune Live Media

It’s no secret that the automotive industry did not withstand the last economic downturn very well. General Motors took the mistakes it made before the Great Recession to heart and made some serious changes. Earlier this month, it announced its latest moves to make sure that it’s as flexible as possible for what’s ahead during the COVID-19 pandemic.

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The American automaker’s big adjustments were to improve its cash position. Investors and experts consider companies with a better cash position as stronger and able to make big movements quickly. GM already expected about $15 billion to $16 billion in cash at the end of March. To soothe any worried investors, it is dipping into revolving credit for an additional $16 billion to double its cash position.

“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,” GM chairman and CEO Mary Barra remarked. “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.”

It’s worth noting that GM made this announcement on March 24, before President Trump ordered it to produce ventilators for the COVID-19 pandemic, and is not affected by that directive. Some of that cash might already be at work to prepare factories for new work ahead.

Besides an improved cash position, GM Financial, which offers auto loans to GM customers, reported at the end of last year that it had $24 billion of liquidity. This is part of its goal to have enough cash on hand to survive six months without capital markets. This isn’t just six months of carrying existing customers, but six months that include new loans for dealership customers.

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There is a lot of uncertainty in the world right now, but it’s a bit of a comfort to know that GM is very ready to do what it needs to make it through.