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.
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Comments
GM dividend suspension comes from stipulations that banks put on GM to extend the credit agreement, GM has not participated in stocks repurchasing in quite some time anyway. GM just may post a profit for the first quarter in the pandemic environment, I am looking for GM to have a robust third and fourth quarter with Arlington shipping new editions of large SUVs, Bolling Green has about a 3-year backlog of Corvettes to build, full-size pickups were just hitting on all cylinders when the shutdown started, outsold F-150 in the first quarter. Cadillac has rebuilt it’s lineup. GM is well position to gain market share, Let’s get the economy back rolling and GM will be just fine.
How about starting with a reduction of the inflated salaries of Mary, Mark , Dyviah and all the way down the line. Unfortunately that has always been the last place that gets cuts.
I can’t wait to see how many of Mary’s stooges give this a thumbs down. Lol
There is no excuse nor rationalization for stock buybacks at all, ever.
Gotta love it, Investors who risk their money on this company get their dividend stopped but loser UAW “members’ pay 3% of their health care costs and haven’t worked but collected a pay check for 2 months.
Seems GM is still in the hammock business for dope UAW line monkeys…. There was a time when GM was in the car business not the benefits business…..
Ford promised the 15 cent dividend would be here, safe. They lied. My faith in Ford, and now GM, is zero. Cut CEO, Board of Directors, Ford Family’s salaries and dividends. They betrayed many who took them at their word, which apparently is WORTHLESS. My retirement is destroyed.