Detroit’s General Motors Co. announced today it intends to drawdown about $16 billion from its revolving credit facilities. The company says the action will increase its cash position and preserve financial flexibility in light of the COVID-19 pandemic. The funds will supplement the company’s cash position of about $15 billion-$16 billion expected at the end of the month.
“We are aggressively pursuing austerity measures to preserve cash and are taking necessary steps in this changing and uncertain environment to manage our liquidity, ensure the ongoing viability of our operations, and protect our customers and stakeholders,” says Mary Barra, chairman and CEO of GM. “Over the past several years, we have made necessary, strategic decisions and structural changes that have transformed the company and strengthened the business, better positioning us for downturns.”
GM Financial also had $24 billion of liquidity at the end of 2019 and expects to end the first quarter with similar levels. The liquidity level is targeted to support at least six months of cash needs, including new originations, without access to capital markets. GM Financial is managing below its target leverage ratios.
“GM Financial has prepared for times like this by maintaining a strong financial position and ready access to cash,” says Dan Berce, president and CEO of GM Financial. “We are confident that we will be able to navigate the challenges created by this environment without capital from GM.”
Due to uncertainty regarding the business impact of COVID-19, GM also is suspending its 2020 guidance.
In related news, GM is preparing to manufacture parts for at least 200,000 ventilators, according to Modern Healthcare.
Southfield’s Meridian Lightweight Technologies Holdings Inc. is helping GM procure six different ventilator compressor parts made of magnesium, according to Joe Petrillo, director of North American sales for Meridian. The parts are too small for Meridian’s machines, but the company has connected GM with Twin City Die Castings Inc. in Minneapolis and in Myotek (east of Manistee) which operates manufacturing plants in Manistee and China.
Fenton’s Creative Foam Corp. plans to start manufacturing foam parts for ventilators as part of the GM response, says Phil Fioravante, chairman and CEO. He says the company expects to begin shipping parts as soon as this week.
“We coalesced as an industry,” Petrillo says. “Usually we (Meridian, Twin City, and Myotek) compete, but in this circumstance, we’re not competitors.”
Petrillo says the plans to start production as early as Monday were being sent this afternoon.
“We’re off and running,” says Eric Showalter, CEO of Mytek. “The tool shops are designing tools right now. We’re able to at least start to kick off tools in China to build these things. If we get paid, we get paid. We’re all just trying to help where we can.”
The Society of Critical Care Medicine projects that 960,000 coronavirus patients will become critically ill in the U.S. and need to be put on ventilators. The organization estimates there are only about 200,000 ventilators in the country.
Michigan Gov. Gretchen Whitmer said Friday that the State Emergency Operations Center is trying to bring more ventilators to Michigan. It’s estimated the state has only 1,000 right now.
“We are working to see how we can increase the number of ventilators in our state,” Whitmer said. “I feel like we are making some progress, but if the federal government is able to procure some ventilators and ship them to Michigan, we will be incredibly grateful.”
Representatives from the U.S. Federal Emergency Management Agency and the White House did not immediately provide an answer as to whether the U.S. government was going to buy more ventilators.
GM previously announced it partnered with Ventec Life Systems, a ventilator manufacturer in Washington. Ventec will leverage GM’s logistics, purchasing, and manufacturing capabilities. GM didn’t announce whether they would use a Ventec facility of a GM facility.
Magna International, which has its Americas office in Troy, has also been contacted to manufacture ventilator parts. Tracy Fuerst, vice president of corporate communications, says the company is investigating possibilities.
BorgWarner in Auburn Hills also is evaluating whether it can help. In addition, Michigan distillers are making hand sanitizer, and Whitmer said Friday that Midland’s Dow might help resupply health care professionals with personal protection equipment and medical supplies.