Executives from General Motors and the Ford Motor Company spoke at an investors conference in New York City yesterday where they said their companies have already made some plans and are making more plans to handle an "economic downturn" or recession.
Investors will be pleased to know that the companies have stockpiled enough liquid assets to make dividends payments for at least two years even if business falters.
GM's Chief Financial Officer Dhivya Suryadevara said the company is also considering selling the cheaper vehicles they never should have abandoned in the first place.
Ford Motor Co (F.N) has a cash buffer of $20 billion for a potential downturn event, Ford North American Chief Financial Officer Matt Fields said at a J.P. Morgan Conference in New York.
General Motors (GM.N) has $18 billion in cash, with the potential to pay two years worth of dividends, the company’s finance head, Dhivya Suryadevara, said at the conference. [...]
Deferring non-essential capital expenditure and considering a shift to lower-priced vehicles are among the few things GM will look at as part of its “downturn planning” to save costs.
Ford said it was “proactively” evaluating its future moves, as it works with economists to model the severity of a possible recession.
There are certainly times when I look out at the sea of large trucks and recall a previous time when a significant number of Americans drove gas-guzzling Hummers. You know, before the 2008 financial crisis.
American automakers recovered from the Great Recession by selling cheaper affordable cars that get good gas mileage, but in recent years they've pivoted toward selling gaudy trucks and SUVs loaded with all the bells and whistles you can imagine. This has been partially driven by consumer demand, but the high price of luxury trucks has also helped these companies weather the pain of Trump's trade war. Trump's tariffs have pinched their profit margins and large trucks sell at the highest margins.
Ford has all but abandoned the car market, selling only the iconic Mustang alongside trucks, SUVs, and crossovers. I don't know what they will do when Americans can't afford what they're offering. Maybe the next president will have to bail them out.
All of this feels so familiar. It's almost surreal. Memories are far too short and nowhere is this more acute than in the world of corporate America.