According to unnamed sources referenced by The Wall Street Journal, General Motors is negotiating a doubling of its credit line, currently worth $5 billion, in an effort to further consolidate its balance sheet and lessen its pension obligations.
GM’s chief executive Dan Akerson has expressed several times that one of the company’s strategies to improve profitability is to protect itself from economic volatility through a fortress balance sheet and pension de-risking tactics. Meanwhile, the automaker is incurring various expenses of significant proportions, including consistent losses produced by its European operations as well as the increased spending on new vehicles and architectures. As such, the quest for a two-fold increase in its credit line may simply be a case for the need of a good source of money for the future.
According to the WSJ, GM is in talks with existing credit suppliers including J.P. Morgan Chase, Morgan Stanley, Citigroup Inc, Barclays and Deutsche Bank.
The GM Authority Take
The General is currently in a very good financial position, as it is at the disposal of $33 billion of cash and has very little debt. So it could be that it’s looking for the $10 billion (or more) in credit to put itself in a position of comfort, especially if it can get its hands on the money at bargain-basement rate.