Markets
GM

Why General Motors Stock Is Rising Today

What happened

Shares of General Motors (NYSE: GM) were moving higher on Wednesday, up 8.9% as of 1:30 p.m. EDT, after U.S. lawmakers reached tentative agreement on a $2 trillion economic-rescue package.

So what

GM, like its Detroit rivals, is in good shape to weather the acute phase of the novel coronavirus pandemic. Its factories in North America are shut down, but it has appropriate inventories and plenty of cash to keep its future-product programs on track.

A partially-assembled Chevrolet Tahoe SUV on the assembly line at a GM factory in Arlington, Texas.

How will the economy look when GM's idled factories are reopened? Image source: General Motors.

The big question facing auto investors looking at GM's shares right now is this: Will the recovery from the economic consequences of the pandemic be quick, or prolonged?

If the recovery is quick -- if production is up and running and the pace of U.S. auto sales is back to what we think of as normal -- then GM will be in great shape. 

But if the U.S. emerges from the pandemic only to find itself in a deep, prolonged recession, then GM -- and lots of other companies -- will have to fight to survive.

The economic-rescue package is in part intended to try to spur a quick recovery. That's why GM's shares are moving up today.

Now what

GM said on Tuesday that it is drawing down about $16 billion from its existing lines of credit to bolster its cash reserve, which will allow it to keep its future-product programs on track through and after the shutdown period. (Unlike rival Ford Motor, GM hasn't suspended its quarterly dividend -- yet.)

CEO Mary Barra appears to have GM well battened-down to weather the coronavirus storm. But whether it's short tempest, or a prolonged one, remains to be seen.

10 stocks we like better than General Motors
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and General Motors wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of March 18, 2020

 

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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

GM F

Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More