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GM suspends its dividend and share repurchases

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Posted: Apr 28, 2020 7:01 AM
Updated: Apr 28, 2020 7:01 AM

General Motors is suspending its dividend and share repurchases. The automaker is trying to preserve cash while auto sales are plunging.

"Fortifying our cash position and strengthening our balance sheet will position the company to create value for all our stakeholders through this cycle," said Chief Financial Officer Dhivya Suryadevara.

The company last suspended its dividend in July 2008, as it hurdled towards bankruptcy and an eventual federal bailout. It resumed paying a dividend in the first quarter of 2014, a little more than three years after its post-bankruptcy initial public offering.

In 2015, under pressure from a group of investors to return more cash to shareholders, GM announced it had authorized a $5 billion share repurchase plan. It authorized another $5 billion repurchase plan in January of 2017. But it had completed only $1.6 billion of that more recent repurchase program through the end of last year.

The share repurchases haven't lifted the stock price over the last five years: GM's stock price fell 3% between the authorization of those share repurchases and the end of last year. Year-to-date GM shares lost 40% of their value through Friday's close, and shares were down nearly 1% in early trading Monday on the latest news.

GM spent $2.2 billion on dividends last year. Lenders demanded the halt of dividends and share repurchases. A syndicate of banks agreed to extend the expiration of some of GM's credit lines only if it stopped dividends and share repurchases, according to a company filing.

The company has closed its North American plants, along with other automakers, to deal with the threat to employees from the coronavirus. In addition, car sales have fallen sharply since the start of March.

Many auto dealers are closed due to stay-at-home orders. And the record number of job losses in the economy and even more people who are working from home means that the need for people to buy new cars has fallen sharply.

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