Detroit delays restarts, GM and Ford grab cash as Ford loses billions
Detroit automakers were planning to restart production on May 4, barring any interventions by state governors—but it appears Michigan’s governor, not to mention the UAW, had other ideas. The Wall Street Journal claims that the new date is May 18, though the UAW apparently hasn’t been told about it yet. The companies are working with the UAW on new safety systems.
GM has been making ventilators, but without any profit.
GM and Ford have both drawn heavily on lines of credit recently, and both suspended dividends until further notice; Ford is expected to announce a $2 billion loss for the first quarter. Both companies have drawn billions of dollars from their credit lines.
Automakers have been reaching out to customers with offers of fully digital sales and home delivery of sterilized cars; buyers can get reasonably good terms on new cars as well. New car sales may be hurt, though, by the collapse of used-car prices. With cars routinely lasting 200,000 miles, it’s often hard to justify a new car over a relatively new used model.
Import automakers, not affected by unions and largely in the less-regulated Southeast, have generally stopped production as well, as the new-car market has died down. Toyota, for one, only closed their plants for “inventory adjustment,” not attributing US plant closures to the coronavirus itself. Tesla only closed down after being visited more than once by local police, defying government orders. Tesla was planning to reopen this week but seems to have been ordered to stand down; the earliest they are likely to be allowed to reopen is May 24, though they might reopen earlier and face some fines.
The plants will be running relatively slowly for a while, as they try to physically distance workers and, presumably, do all their work while wearing protective gear.
The economy is expected to start picking up again in May as governors reduce their lockdown measures—not because of reduced health risks, but because states are not getting federal support (though the cruise-ship, airline, or coal industries are well funded). States have been providing massive amounts of unemployment benefits even as tax collections collapsed, especially in states without income taxes; and states are not allowed to declare bankruptcy or run deficits from year to year.
Clark Westfield grew up fixing up and driving past-their-prime American cars, including various GM and Mopar V8s. He has ghostwritten auto news for the last few years, lives in Farmingdale, New York, and can be reached at +1.516-531-4021.