Automaker General Motors Co. (NYSE: GM) announced Tuesday morning that it plans to draw approximately $16 billion from its revolving credit facilities in order to “increase GM’s cash position and preserve financial flexibility in light of current uncertainty in global markets resulting from the COVID-19 pandemic.” The company also said it expected to end the first quarter with about $15 billion to $16 billion in cash.

The inference investors are drawing from this is that dividends (currently 8.38% yield) are protected. Shares traded up nearly 8% following the announcement.

Another interpretation may be more accurate. Last week when the Senate drafted legislation for an economic stimulus package for the U.S. economy, automakers were included among the industries in line for help. But that has little to do with selling new cars and everything to do with maintaining jobs at a time when those jobs are desperately needed to provide income for workers.

Auto dealers are scrambling to be named an “essential” industry exempt from the closures that have hit other retail operations. Whether they are successful in pressing that claim remains a question.

What is not in question is the impact of a financial disaster on automakers and their supply chain that supports hundreds of thousands of American jobs. The auto industry bailout following the financial crisis of 2008 worked pretty well and a similar bailout now (this time with constraints on dividends and buybacks) could reasonably be expected to follow that model.

GM’s CEO Mary Barra commented:

We are aggressively pursuing austerity measures to preserve cash and are taking necessary steps in this changing and uncertain environment to manage our liquidity, ensure the ongoing viability of our operations and protect our customers and stakeholders. Over the past several years, we have made necessary, strategic decisions and structural changes that have transformed the company and strengthened the business, better positioning us for downturns.

In 2019, GM’s cash flow from operations totaled just over $15 billion and the company had some $20.5 billion in cash and equivalents at the end of the year. Fourth-quarter cash flow from operations totaled $3.5 billion and, if the company expects to have $15 billion to $16 billion in ready cash at the end of March, that means that GM has burned through $4 billion to $5 billion in the quarter.

First-quarter cash flow from operations is likely to take a serious hit because sales in China are likely to have tumbled, as will have U.S. sales. Restrictions on social movement to keep people in their homes and out of dealer showrooms are unlikely to boost U.S. sales until late in the second quarter.

For the U.S. economy in the age of COVID-19, the auto industry is important to all levels of government because it supports so many jobs, not because it sells cars. The automakers would like to lever that into some protection for shareholders. How it all works out won’t be known for months. Until then, expect more volatility.

GM stock traded up about 8.7% minutes after the opening bell Tuesday at $19.13 in a 52-week range of $14.33 to $41.90.

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