Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of General Motors Are Surging Today

By John Rosevear - Mar 24, 2020 at 9:56AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

GM bolstered its balance sheet without cutting its dividend.

What happened

Shares of General Motors (GM 5.55%) were rising on Tuesday, after the company announced measures to bolster its balance sheet -- but didn't cut its dividend.

As of 10:30 a.m. EDT, GM's shares were up about 13.3% from Monday's closing price. 

So what

GM said in a statement on Tuesday morning that it will draw down about $16 billion from its existing lines of credit to bolster its balance sheet as it braces for an extended shutdown of its factories in North America. 

Barra is standing at a podium in front of a GM backdrop.

CEO Mary Barra will try to get GM through the pandemic without a dividend cut. Image source: General Motors.

The company also withdrew its guidance for 2020. 

Those were both prudent moves under the circumstances. But what GM didn't do is also important: It didn't cut its dividend. That's in contrast to old rival Ford Motor Company (F 3.89%), which said last week that it would draw down $15.4 billion from its credit lines and suspend its dividend to conserve cash.

Now what

GM should now have plenty of cash to weather the coronavirus pandemic. As CEO Mary Barra pointed out Tuesday morning, restructuring moves made over the last few years have put GM in good shape to ride out an economic downturn. 

The $16 billion GM plans to borrow will be in addition to its existing cash hoard, which GM estimates will be between $15 billion and $16 billion as of the end of March. 

The takeaway for investors: For the moment, GM -- and its dividend -- are safe. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

General Motors Company Stock Quote
General Motors Company
GM
$34.82 (5.55%) $1.83
Ford Motor Company Stock Quote
Ford Motor Company
F
$12.01 (3.89%) $0.45

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.