Economy

Ford, General Motors Begin Recession Planning

JM Ashby
Written by JM Ashby

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.

From Reuters:

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.

  • David Greenberg

    When are these corporate ah’s Going to lean on their republican toadies in Congress to get rid of the reptile in the WH? They got their ridiculous tax bill, what more can they hope for?

    • 1933john

      Not to pay FICA.

  • Nefercat

    Really? It only took these hot shot highly paid execs two and a half years to figure out that they should plan for economic disaster with the Orange Moron at the wheel?

  • muselet

    Car company execs would be very stupid not to plan for a recession, even if there are no obvious signs of one.

    Car company execs were very stupid indeed to concentrate only on high-margin vehicles like pick-em-up trucks and SUVs (which one journalist years ago described as being “neither sporty or useful”). It was an understandable decision, since the Trump administration was starting to meddle in the economy (remember tariffs on steel and aluminum from Canada and Mexico?), but it wasn’t a smart one.

    The next five to ten years will be … erm … interesting for the car industry.

    –alopecia

  • ffakr

    I don’t get it.
    I had a Ford Escape years ago. It was junk, though early models did have a particularly bad reputation. Made the mistake of selling to my mom (she insisted, despite my well-founded warnings. Never asked her to finishing paying for it after she had a huge repair bill).
    Drove it after I was strictly back in cars for a while and I was shocked at how awful it was to drive.

    I’ll get a pickup some day. I actually Need one.. I own a 137-YO farmhouse that will always be under repair and I’m a woodworker.
    I’d never use a pickup as a daily driver though. It’ll only be our backup-‘car’/hauler because no pickup or suv could replace my beloved Prius-C, especially when I need to park in the City (I live in the -burbs).

    That reminds me.. I need to check the pressure in my tires, wash out the air filter and I’m due for an Oil change. I’ve ONLY been averaging ~50mpg so I know something’s off. My best for a ~20-mile trip was something like 76mpg. 😛

  • Time was when company owners/managers would forecast out a decade to make sure they were going to still be profitable. Now, thanks to bean-counting, they forecast out a maximum of one quarter. It’s no wonder that corporations gouge customers and pay huge salaries and bonuses to the upper management and dividends to the stockholders. It’s all part and parcel of the immediate gratification syndrome.