Coronavirus hits GM Q1 profit hard

[DETROIT] General Motors on Wednesday reported a huge plunge in first-quarter quarter profit as it burned through cash with its the North American vehicle production shut down due to the coronavirus pandemic.

The top US automaker posted net income attributable to common stockholders of US$247 million or 17 cents per share, down more than 88 per cent from US$2.12 billion or US$1.48 per share in the same period in 2019.

GM hopes to restart most North American production on May 18.

The Detroit automaker has slashed costs and made other moves during the Covid-19 outbreak, including suspending its dividend and share buybacks, closing its Maven car-sharing unit, delaying work on some product programs, reducing marketing budgets and cutting white-collar workers' salaries. It also added US$16 billion to its cash position by drawing down credit lines.

GM also has suspended its 2020 profit outlook given the uncertainty.

Smaller US rival Ford Motor Co last month raised another US$8 billion from corporate debt investors to further shore up its finances after previously drawing down its credit lines.

GM Chief Financial Officer Dhivya Suryadevara warned employees in an internal video on March 26 that "significant austerity measures" were necessary to avoid "serious damage" to GM's long-term viability.

One ray of hope has been China, where the pandemic began but where GM has resumed production. While first-quarter sales there fell 43 per cent, they rebounded to grow by double digits in April. That offers hope for the US market, where sales declined 7 per cent in the first quarter.

US automotive production ground to a halt in March as the number of Covid-19 infections grew rapidly. But with President Donald Trump pushing for Americans to get back to work and several US states reopening their economies, the focus in the auto sector has shifted to when production can safely restart.

GM, Ford and Fiat Chrysler Automobiles NV (FCA) are aiming to resume production some time in May and are negotiating with the United Auto Workers (UAW) union, which represents their US hourly workers, about when and how to safely restart.

REUTERS