GM says it can pay off $16 billion loan if U.S. recovery continues

By Nick Carey and Ben Klayman (Reuters) - General Motors Co on Wednesday said if the U.S.

Reuters July 30, 2020 00:06:55 IST
GM says it can pay off $16 billion loan if U.S. recovery continues

GM says it can pay off 16 billion loan if US recovery continues

By Nick Carey and Ben Klayman

(Reuters) - General Motors Co on Wednesday said if the U.S. economy continues to recover from the coronavirus pandemic and the auto industry does not experience any further production shutdowns, the No. 1 U.S. automaker should be able to generate enough cash to pay off a $16 billion loan by the end of the year.

"Obviously, it is still a very fluid situation as you know and we're watching the virus, the economy and its impact on the overall industry very closely," Chief Financial Officer Dhivya Suryadevara told reporters.

She spoke after GM posted a smaller-than-expected second-quarter loss thanks to solid high-margin pickup truck sales and aggressive cost-cutting that helped mitigate the impact of a forced shutdown that left its North American plants shut for eight of the 13 weeks in the quarter.

After initially rising, GM's shares were off 1.7% in early afternoon trading.

"We maintain a sell (rating) following the stock's sharp rebound, not expecting GM's vehicle sales to return to pre-pandemic levels anytime soon and consider its new model pipeline as relatively unexciting compared to peers," CFRA Research analyst Garrett Nelson said in a research note.

If the recovery continues, GM expects adjusted operating earnings in the second half of the year in the range of $4 billion to $5 billion, with the third quarter slightly stronger than the fourth quarter, Suryadevara told analysts on a later call. She said in that scenario GM should generate cash flow of between $7 billion and $9 billion during the second half.

Analysts were expecting second-half operating earnings of more than $4.4 billion.

Suryadevara also said GM should repay its $16 billion revolving credit line by the end of 2020, an action that again depends on a continued economic recovery and annual industry-wide U.S. new vehicle sales of 14 million units this year.

But spiking COVID-19 cases across Southern and Southwestern U.S. states have left that recovery in doubt.

Weekly jobless claims numbers from the Labor Department released last week showed the number of Americans filing for unemployment benefits rose, unexpectedly, for the first time in nearly four months, suggesting the labor market was stalling amid the resurgence in new COVID-19 cases and depressed demand.

Asked whether spiking COVID-19 infection rates were hurting demand anywhere, Chief Executive Mary Barra told analysts GM was "cautiously optimistic," citing improving China and U.S. sales.

GM said it was "working all avenues" to boost U.S. dealer inventories and all of its U.S. full-size pickup truck and full-size SUV plants are back at three shifts. Nearly all of its other plants are now working at pre-pandemic shift levels.

GM also said it would increase production of light-duty full-size pickups at its Fort Wayne, Indiana, assembly plant by about 1,000 units a month beginning Sept. 1.

GM reported a net loss for the quarter of $758 million, or 56 cents per share, down from a profit of $2.4 billion, or $1.66 per share, a year earlier. On an adjusted basis, the loss was $806 million.

Excluding onetime items, GM reported a loss of 50 cents per share. Analysts had expected a loss of $1.77 per share.

(Reporting by Nick Carey and Ben Klayman; editing by Jason Neely, Steve Orlofsky and Jonathan Oatis)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.