By Nick Carey and Ben Klayman
DETROIT (Reuters) – General Motors Co on Wednesday reported a huge plunge in first-quarter profit that still raced past expectations, and the automaker outlined plans for a May 18 restart of most of its North American plants shut down by the coronavirus pandemic.
The news sent GM shares up 8% in pre-market trading.
The No. 1 U.S. automaker posted net income attributable to common stockholders of $247 million or 17 cents per share, down more than 88% from $2.12 billion or $1.48 per share in the same period in 2019. Excluding one-time items, GM reported 62 cents per share, higher than the 30 cents per share expected by Wall Street analysts.
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 $16 billion to its cash position by drawing down credit lines.
GM said ended the first quarter with $33.4 billion in automotive cash, including an approximately $16 billion drawdown
from its revolving credit facilities.
GM had previously suspended its 2020 profit outlook because of uncertainty over the outbreak and did not provide an update on Wednesday.
Smaller U.S. rival Ford Motor Co last month raised another $8 billion from corporate debt investors to further shore up its finances after previously drawing down its credit lines.
One ray of hope has been China, where the pandemic began but where GM has resumed production. While first-quarter sales there fell 43%, they rebounded to grow by double digits in April. That offers hope for the U.S. market, where sales declined 7% in the first quarter.
GM said on Wednesday it expects dividends will continue to be paid from its China operations from the second quarter onwards this year.
U.S. 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 U.S. 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 U.S. hourly workers, about when and how to safely restart.
FCA said on Tuesday it expects most of its North American plants to reopen by May 18. Ford has not announced a restart date.
The UAW said last month that it was “too soon and too risky” to reopen plants in early May. President Rory Gamble said last week the union was asking for “as much testing as possible” to protect its workers.
In its restart playbook, GM’s strategy relies heavily on social distancing, temperature checks, regular sanitizing, improved plant ventilation and use of personal protective equipment, but does not address assembly line workstations.
Michigan Governor Gretchen Whitmer previously extended the state’s stay-at-home order through May 15 but lifted restrictions for some businesses other than manufacturing. Neighboring Ohio allowed manufacturing to resume on Monday.
Once production resumes, the question will be how fast U.S. demand rebounds, with some dealers expecting big discounts to lure consumers back to showroom floors.
Some industry officials have said some level of government stimulus for the U.S. auto sector will be needed for consumers once the pandemic recedes.
During the Great Recession of 2008-09, the U.S. government rolled out a “cash for clunkers” program, which offered consumers rebates of up to $4,500 to trade in older gas guzzlers.
(Reporting by Ben Klayman and Nick Carey; Editing by Nick Zieminski)