Automakers’ pocketbooks are taking a huge hit amid the COVID-19 pandemic, with idled plants, closed dealerships and product launch delays leading to massive losses in the industry.
While General Motors is in stronger financial standing than some of its rivals, the automaker is not immune to the negative impact the pandemic is having on the industry. Speaking to The Detroit Free Press, David Whiston, an automotive equity strategist at Morningstar Research Services, estimated that GM was losing about $130 million a day at the moment.
While GM’s plants and offices remain closed, the automaker still has to pay worker salaries during the shutdown and is still paying for plant security, cleaning and utilities. Compounding the problem are plummeting U.S. vehicle sales, Whitson explained. U.S. light-vehicle sales are expected to come in at just 620,000 units for April – down more than 50 percent from April 2019.
This week, GM announced it had suspended its quarterly cash dividend on common stock as well as its share repurchase program as it faces continued economic hardship. The company also took out a $3.6 billion extension to its three-year revolving credit line to free up some cash for the year.
GM won’t be out of the woods entirely when the country opens back up, either. Many suppliers are also at risk due to the pandemic. If a supplier goes under, automakers may have trouble sourcing parts to get production back underway. Stefan Asenkerschbaumer, CFO for major German supplier Bosch, said this week the company is bracing “for a global recession that will also have a considerable impact on our own performance in 2020.”
One good bit of news, The Detroit Free Press points out, is that many automakers have plenty of supply on hand due to dealerships being closed. As of April 1st, GM had 99 days worth of vehicle inventory on hand. The automaker will be focused on getting its Chevrolet and GMC pickup truck lines back up and running, however, as it already had a relatively low supply of the popular trucks due to the 2019 UAW strike.
GM and the Detroit Big Three are reportedly looking to get their assembly plants back online by late May, though the UAW has warned against opening up too early, saying a second COVID-19 wave may lead to further economic hardship.
Source: The Detroit Free Press