General Motors to draw down US$16 billion in credit, suspends 2020 outlook

General Motors to draw down US$16 billion in credit, suspends 2020 outlook

The GM logo is seen at the General Motors plant in Sao Jose dos Campos
FILE PHOTO: The GM logo is seen at the General Motors plant in Sao Jose dos Campos, Brazil, January 22, 2019. REUTERS/Roosevelt Cassio

REUTERS: General Motors Co said on Tuesday it will draw about US$16 billion from its credit lines in a bid to beef up liquidity amid rising business impact from the fast-spreading coronavirus outbreak.

The No.1 U.S. automaker, which also suspended its 2020 outlook, said it was evaluating its quarterly dividend, but has not yet decided to suspend it. As of the end of 2019, GM had US$34.6 billion in liquidity, including US$17.3 billion in cash.

Companies across the globe are tapping their credit lines to shore up liquidity and help them cover their costs amidst a crisis which has brought many elements of the global economy to a complete standstill.

"We are aggressively pursuing austerity measures to preserve cash and are taking necessary steps in this changing and uncertain environment to manage our liquidity," Chief Executive Officer Mary Barra said.

The pandemic has already hit other automakers as well and more are expected to cut their expectations.

Last week, rival Ford abandoned its 2020 forecast and said it drew down US$15.4 billion from two credit facilities to bolster its balance sheet. Its more than US$37 billion in cash now dwarfs its market capitalization of about US$16 billion.

Analysts believe that corporate liquidity is paramount and the U.S. automakers have strong enough balance sheets to weather the outbreak's impact.

Both GM and Ford have seen U.S. employees test positive for the virus, leading them to shutdown their North American plants to prevent its spread among factory workers.

Meanwhile. U.S. new vehicle demand dropped 13per cent in the first 19 days of March, according to research firm J.D. Power, while brokerage Morgan Stanley expects auto sales to decline 9per cent this year, a first in many years.

Shares of both Ford and GM were up 7.5per cent to 11per cent in premarket trading.

(Reporting by Joe White in Detroit, Rachit Vats and Sanjana Shivdas in Bengaluru; Editing by Arun Koyyur)

Source: Reuters

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