General Motors (GM - Free Report) withdraws 2020 guidance citing the uncertainty caused by the coronavirus pandemic. The auto giant intends to drawdown approximately $16 billion from its revolving credit facilities, which would be used to deal with the downturn caused by production shutdowns
It is a constructive step to boost the firm’s cash position and preserve financial flexibility in the face of rising global market uncertainty due to the coronavirus-induced crisis. The borrowed funds will be in addition to the company’s current cash reserve, which it estimates to range from $15-$16 billion as of the end of March.
In addition, the company’s GM Financial (GMF) arm is highly liquid and capitalized. GMF had $24 billion in liquidity at the end of 2019 and expects similar liquidity rates at the end of first-quarter 2020. The liquidity level is aimed at meeting cash requirements of at least six months, including new originations, without exposure to the capital markets.
Moreover, General Motors is providing new vehicle financing programs to spur demand during such uncertain times, which is denting consumer confidence and slowing dealer-showroom traffic. GMF is offering 0% financing for seven years –– two years more than recent programs and four months deferred payments for those with A+ credit.
Further, General Motors has temporarily shut all U.S. factories at least until Mar 30 to contain the spread of coronavirus, and will evaluate the situation on a weekly basis after that.
The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Meanwhile, General Motors is also collaborating with Ventec Life Systems to boost the production of respiratory-care products to fight against the COVID-19 pandemic. The car giant will lend its logistics, purchasing and manufacturing expertise to ramp up the manufacture of critically-important ventilators.
Apart from General Motors, the rapidly-spreading coronavirus pandemic has become a concern for other global auto biggies as well. Companies including Ford (F - Free Report) , Cummins (CMI - Free Report) , Superior Industries (SUP - Free Report) , Oshkosh, Navistar and PACCAR have also withdrawn their 2020 guidance. Several automakers have closed their factories and suspended production, while the others plan to change manufacturing processes and cut production levels in their plants, in line with the nation-wide campaign addressing the crisis. The pandemic has not only dented consumer sentiment and thwarted vehicle demand but also distorted the supply-chain balance globally.
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