Please ensure Javascript is enabled for purposes of website accessibility

Shares of Ford, GM, and Fiat Chrysler Are Falling on Cost Cuts and Cash Worries

By John Rosevear - Mar 27, 2020 at 11:51AM

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

With factories closed, all three automakers are scrambling to conserve cash.

What happened

Shares of the three Detroit automakers were trading down on Friday morning, as auto investors turned pessimistic after Ford Motor Company (F 0.86%) and General Motors (GM -0.20%) announced cost cuts.

Here's where these companies' stocks were trading as of 10:30 a.m. EDT:

  • Fiat Chrysler Automobiles (FCAU), down 6.6% from Thursday's closing price.
  • Ford, down 3.7%.
  • GM, down 7.1%.

So what

Last week, FCA, Ford, and GM all shut down their factories in North America to reduce inventories and help slow the spread of the COVID-19 virus. With very little revenue coming in for the time being, all three are now focusing on bolstering their cash hoards and cutting spending -- and their stocks are falling as auto investors come to terms with the implications. 

Here's where things stood with each on Friday morning.

Fiat Chrysler Automobiles

FCA said on Thursday that it had agreed to a new 3.5-billion-euro ($3.8 billion) line of credit with two banks, for "general corporate purposes and for working capital needs." The new credit line is in addition to FCA's existing credit facilities, worth about 7.7 billion euros. Those existing facilities include a 1.5-billion-euro line of credit that the company has begun to draw down, FCA said.

FCA is in the midst of merger talks with French automaker Peugeot (PUGOY); Peugeot parent PSA Group confirmed on Thursday that those talks are proceeding as planned despite the coronavirus pandemic. The deal is expected to close in the first quarter of 2021. 

Ford Motor Company

CEO Jim Hackett told Ford employees on Thursday that a wave of cost cuts is coming -- but those cuts will not include job reductions. Hackett said that Ford's top 300 executives will defer 20% to 50% of their salaries for at least five months, beginning on May 1. While Ford will freeze hiring and defer merit-based salary increases for the time being, Hackett said, the company's goal is to get through the crisis without eliminating jobs.

A Ford Super Duty pickup parked in front of the company's Kentucky Truck Plant.

Ford is hoping to reopen several of its truck factories in April. Image source: Ford Motor Company.

Separately, Ford said that it's aiming to restart production at a few North American factories in April. The factories in question make pickups, commercial vehicles, and Ford's Fusion and Lincoln MKZ sedans.

General Motors

CEO Mary Barra told GM employees on Thursday that nearly all of the company's salaried employees will have 20% of their compensation deferred, beginning on April 1. Executives will defer 25%, and members of GM's senior management team will have 30% deferred.

The deferred amounts will be paid back in a lump sum by March 15 of next year, Barra said.

Salaried employees who can't work from home, mostly engineers and manufacturing experts, will receive 75% of their pay plus benefits in lieu of being laid off. That includes about 6,500 people in the United States.

GM is also cutting back many of its future-product development programs. But it has told suppliers that its upcoming full-size SUV launches, its electric-vehicle programs, and the self-driving Cruise Origin taxi will remain on schedule. 

Now what

There's still a lot we don't know, and (in all likelihood) a lot that the companies themselves have yet to sort out. All three companies will report first-quarter sales next week, and first-quarter earnings in late April or early May. We'll know much more about the state of their operations and their expectations for the next few months after those reports.

John Rosevear owns shares of Ford and General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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

Ford Motor Company Stock Quote
Ford Motor Company
F
$16.32 (0.86%) $0.14
General Motors Company Stock Quote
General Motors Company
GM
$39.40 (-0.20%) $0.08
Fiat Chrysler Automobiles N.V. Stock Quote
Fiat Chrysler Automobiles N.V.
FCAU
Peugeot S.A. Stock Quote
Peugeot S.A.
PUGOY

*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
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

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.