General Motors

General Motors can pay off $16 billion loan if U.S. recovery continues

General Motors on Wednesday said if the U.S. economy keeps showing recovery from the coronavirus crisis and the auto industry does not experience any more production shutdowns, then the automaker should be able to generate enough cash to pay off a $16 billion loan by the end of this 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 whole industry very closely,” Chief Financial Officer Dhivya Suryadevara informed reporters.

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

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

Analysts were expecting second-half operating revenues of over $4.4 billion.

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

But the increase in COVID-19 cases across the country have left that recovery in doubt.

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

Asked whether increasing COVID-19 infection rates were damaging demand anywhere, CEO Mary Barra told analysts that the automaker was “cautiously optimistic,” citing improving China and U.S. sales.

GM said it was “working all avenues” to increase U.S. dealer inventories and all of its U.S. full-size pickup truck and full-size SUV plants have returned to operate at three shifts. Almost all of its other plants are now working at pre-pandemic shift levels.

GM also said it would boost production of light-duty full-size pickups at its Fort Wayne, Indiana, assembly plant by about 1,000 units on monthly basis starting from September 1.

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

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

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