General Motors has announced plans to suspend its quarterly cash dividend on common stock as well as its share repurchase program as it continues to navigate an unstable economic environment caused by the ongoing COVID-19 pandemic. The announcement to suspend the GM dividend took place yesterday, alongside announcing a $3.6 billion extension to the company’s three-year revolving credit line.
“We continue to enhance our liquidity to help navigate the uncertainties in the global market created by this pandemic,” said GM Chief Financial Officer, Dhivya Suryadevara. “Fortifying our cash position and strengthening our balance sheet will position the company to create value for all our stakeholders through this cycle.”
The suspension of the GM dividend and cash buy-back program is joined by “significant austerity measures to preserve near-term available cash,” states a press release from the automaker. GM recently drew $16 billion from its credit lines to navigate the ongoing pandemic.
However, the Detroit-based automaker also stated that it “remains committed to its capital allocation framework, which is focused on reinvesting in the business at pretax returns equal to or greater than 20 percent; maintaining a strong investment-grade balance sheet; and returning capital to shareholders after the first two objectives have been met.”
In that regard, it would seem that the GM dividend and share repurchase program will resume when the company feels that it has successfully steered clear of the ongoing COVID-19 pandemic and has a cash position and balance sheet that are sufficiently strong.
In other news, GM cross-town rival, Ford Motor Company, has just announced a first quarter 2020 net loss totaling $2 billion, with the loss expected to reach $5 billion in the second quarter. Similar to GM, Ford also suspended its dividend on common stock and pulled $15.4 billion from available credit lines, and then issued unsecured bonds in the amount of $8 billion.
By comparison, General Motors has yet to announce a forecast for the first quarter, despite the coronavirus pandemic. The automaker will report its earnings for the period on the morning of Wednesday, May 6th, and GM Authority will be on hand to provide coverage of the results. GM Q1 2020 sales fell 7 percent to 618,335 units in the United States and was off 43 percent to 461,716 units in China. GM shares dipped to $21.45 per share the morning of the announcement on Monday, but recovered in Tuesday intra-day trading to $22.18 per share.
GM vehicle production remains idled, though the latest industry rumblings state that it will start back up on May 18th for Detroit’s Big Three.