What happened
Shares of General Motors (GM 4.37%) were moving higher on Wednesday, up 8.9% as of 1:30 p.m. EDT, after U.S. lawmakers reached tentative agreement on a $2 trillion economic-rescue package.
So what
GM, like its Detroit rivals, is in good shape to weather the acute phase of the novel coronavirus pandemic. Its factories in North America are shut down, but it has appropriate inventories and plenty of cash to keep its future-product programs on track.
How will the economy look when GM's idled factories are reopened? Image source: General Motors.
The big question facing auto investors looking at GM's shares right now is this: Will the recovery from the economic consequences of the pandemic be quick, or prolonged?
If the recovery is quick -- if production is up and running and the pace of U.S. auto sales is back to what we think of as normal -- then GM will be in great shape.
But if the U.S. emerges from the pandemic only to find itself in a deep, prolonged recession, then GM -- and lots of other companies -- will have to fight to survive.
The economic-rescue package is in part intended to try to spur a quick recovery. That's why GM's shares are moving up today.
Now what
GM said on Tuesday that it is drawing down about $16 billion from its existing lines of credit to bolster its cash reserve, which will allow it to keep its future-product programs on track through and after the shutdown period. (Unlike rival Ford Motor, GM hasn't suspended its quarterly dividend -- yet.)
CEO Mary Barra appears to have GM well battened-down to weather the coronavirus storm. But whether it's short tempest, or a prolonged one, remains to be seen.
