(Reuters) - General Motors Co (NYSE:GM) said on Tuesday it will draw about $16 billion from its credit lines in a bid to beef up liquidity amid rising business impact from the fast-spreading coronavirus outbreak.
The No.1 U.S. automaker, which also suspended its 2020 outlook, said it was evaluating its quarterly dividend, but has not yet decided to suspend it. As of the end of 2019, GM had $34.6 billion in liquidity, including $17.3 billion in cash.
Companies across the globe are tapping their credit lines to shore up liquidity and help them cover their costs amidst a crisis which has brought many elements of the global economy to a complete standstill.
"We are aggressively pursuing austerity measures to preserve cash and are taking necessary steps in this changing and uncertain environment to manage our liquidity," Chief Executive Officer Mary Barra said.
The pandemic has already hit other automakers as well and more are expected to cut their expectations.
Last week, rival Ford abandoned its 2020 forecast and said it drew down $15.4 billion from two credit facilities to bolster its balance sheet. Its more than $37 billion in cash now dwarfs its market capitalization of about $16 billion.
Analysts believe that corporate liquidity is paramount and the U.S. automakers have strong enough balance sheets to weather the outbreak's impact.
Both GM and Ford have seen U.S. employees test positive for the virus, leading them to shutdown their North American plants to prevent its spread among factory workers.
Meanwhile. U.S. new vehicle demand dropped 13% in the first 19 days of March, according to research firm J.D. Power, while brokerage Morgan Stanley (NYSE:MS) expects auto sales to decline 9% this year, a first in many years.
Shares of both Ford and GM were up 7.5% to 11% in premarket trading.