General Motors Co (GM.N) on Wednesday said if the U.S. economy continues to recover from the coronavirus pandemic and the auto industry does not experience any further production shutdowns, the No. 1 U.S. automaker should be able to generate enough cash to pay off a $16 billion loan by the end of the year, Trend reports citing Reuters.
“Obviously, it is still a very fluid situation as you know and we’re watching the virus, the economy and its impact on the overall industry very closely,” Chief Financial Officer Dhivya Suryadevara told reporters.
She spoke after GM posted a smaller-than-expected second-quarter loss thanks to solid high-margin pickup truck sales and aggressive cost-cutting that helped mitigate the impact of a forced shutdown that left its North American plants shut for eight of the 13 weeks in the quarter.
After initially rising, GM’s shares were off 1.7% in early afternoon trading.
“We maintain a sell (rating) following the stock’s sharp rebound, not expecting GM’s vehicle sales to return to pre-pandemic levels anytime soon and consider its new model pipeline as relatively unexciting compared to peers,” CFRA Research analyst Garrett Nelson said in a research note.
If the recovery continues, GM expects adjusted operating earnings in the second half of the year in the range of $4 billion to $5 billion, with the third quarter slightly stronger than the fourth quarter, Suryadevara told analysts on a later call. She said in that scenario GM should generate cash flow of between $7 billion and $9 billion during the second half.
Analysts were expecting second-half operating earnings of more than $4.4 billion.
Suryadevara also said GM should repay its $16 billion revolving credit line by the end of 2020, an action that again depends on a continued economic recovery and annual industry-wide U.S. new vehicle sales of 14 million units this year.