General Motors (GM) drew down its $16 billion credit line today to maximize its financial cushion as the auto industry headed into a very uncertain future. The $16 billion drawdown adds to the $16 billion in cash that General Motors projects to have on hand by the end of the month.
That $32 billion is certainly enough to pay the $560 million dividend for the first quarter. The company is scheduled to declare its second quarter dividend on April 27. I’d guess that GM will try to keep that dividend for another quarter, but everything depends on the course of the coronavirus recession.
GM competitor Ford Motor (F) has also tapped its on $15.4 billion credit line but has suspended its dividend.
The big question, obviously, is when General Motors and the rest of the auto industry might be able to produce and sell some cars. The $32 billion in cash that GM will have after the drawdown is enough to cover the company for 21 weeks without any production at all, RBC Capital Markets wrote in a note to clients. GM suspended its financial guidance for the year last week. In earlier projections GM had said it expected to make between $5.75 and $6.25 a share this year. The company’s shares closed at $21.11 today, March 24.
General Motors shares rose 19.94% in the market rally today.
I hold GM shares in my 12-18 month Jubak Picks Portfolio and in my Dividend Portfolio.