In an attempt to preserve its dwindling cash as the economy remains paralyzed, General Motors announced that it has suspended its cash dividend of $1.52/share and share repurchase program while taking "other significant austerity" measures to preserve near-term available cash. The automaker also said it has extended a $3.6 billion, three-year revolving credit facility to April 2022 to help bolster its liquidity, and added to its earlier extension of the $2 billion credit agreement done in early April.
GM said it also intends to focus on reinvesting in the business at pretax returns equal to or greater than 20% while seeking to maintain investment grade; the company said it would resume returning capital to shareholders when those measures are met.
"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."
GM’s U.S. plants have been shuttered since mid-March due to Covid-19. As CNBC reminds us, the automaker along with Ford Motor and Fiat Chrysler are in discussions with the United Auto Workers union to reopen the plants, but union leaders said last week they oppose an early-May restart, which several automakers have announced.
GM and Ford are among the only major automakers that have yet to announce a time frame to restart production. Fiat Chrysler earlier this month announced plans to restart production next Monday.
GM’s decision to suspend its dividend comes more than a month after Ford did the same and withdrew its 2020 guidance. GM last month suspended its guidance for the year.