Much has been written about the alleged upcoming downturn in the automotive industry and General Motors made it clear it was preparing for change when it began restructuring in late 2018.
Now the automaker’s chief financial officer, Dhivya Suryadevara, has provided more insight on how the automaker is preparing for any shifts in the automotive sector in an interview with Reuters.
Suryadevara told the news agency that GM currently has $18 billion in cash stockpiled away, giving it enough to pay two years worth of dividends. She also said the automaker has also simulated both moderate and severe downturn scenarios, like what happened in 2008-2009, in order to gauge how such an economic downturn may effect the company today.
“It’s something that we continually keep watching and updating to make sure that we’re all set for when the downturn does come,” Suryadevara explained.
It’s not time to panic, though. Reuters reports GM does not anticipate an imminent downturn, with immediate fluctuations in the industry not necessarily reflecting its long-term health.
GM would shift to selling lower-priced vehicles should a 2008-2009-esque scenario should arise, Suryadevara explained, and would also defer costs related to non-essential capital expenditures.
Reuters’ report indicates that GM’s crosstown rival Ford has around the same amount of cash on hand at $20 billion and is also monitoring the economic situation closely. Ford is working with economists to determine the best long-term strategy, as well.
Last year GM closed four US plants and one Canadian plant as it looked to cut back on spending and invest money into the healthiest and most profitable parts of its business – that being crossovers, SUVs and pickup trucks. The automaker is now beginning to adjust output of even popular models like the Chevrolet Equinox, however, which could be a sign that vehicle production is trending downward.
The ongoing trade war between the US and China also stands to threaten automakers’ business as they grapple with increased material costs.
Subscribe to GM Authority for around-the-clock GM news coverage.
Source: Reuters
Comments
Check the numbers. 3 billion profit in the 2nd quarter. All derived from GM North America. With the vast majority coming from U.S. sales. I thinks it’s safe to say The General could invest more in U.S. manufacturing, given that U.S. consumers invest heavily in their product.
It’s a global game. The health of GM globally protects the health of GM US domestically.
not to worry. no downturn. trump promised gdp growth of 4 – 6 percent due to the massive tax cut.
It’s not so much the US economy but the global economy that can be worrisome.
There is going to be a decline in the growth of the automotive markets globally. The key now will be in profits from careful pricing and profits per unit sold.
With such high development cost there is little margin for error. So many underestimate what cost are today.
Also so many forget to count the escalating prices of cars and how thatbthey can slow the new car segment too.
Suryadevara has a brilliant strategy there. When the downturn comes, shift to selling less expensive vehicles and defer capital expenditures. No wonder she gets over $5,500,000 per year while closing factories and laying off hard working Americans.
Good, since GM does not anticipate a slowdown, they can load new product in DHAM and Lordstown and hire back some engineers. After all, wasn’t all the bloodletting a result of trying to stay ahead of the recession per Barra?
It seems that small cars be bestseller again. Ops, but GM concetrate on big SUV market now. History is repeating again.
Could be that it is not a down turn but a strike they are prepairing for?
If that was the case, it would be stupid on GM’s part. They can loose a couple of billion on a strike and create a lot of animosity and badwill, or they can spend the same couple of billion of dollars on their US plants including Lordstown and DHAM and create some goodwill and jobs.
As someone who relies on GM for part of my business….they are already in cautious slowdown mode…..and everyone else in NA that we haul for except FCA is doing the same. When FCA’s orgy of fleet sales finally goes poof, they will slow as well.