General Motors has announced the execution of an unsecured US$14.5bn revolving credit facility consisting of a US$10.5bn five-year facility and a US$4bn three-year facility. The facility amends and extends GM's existing US$12.5bn revolving credit facility.
GM said the new facility would help the company in the event of an industry downturn.
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"We believe this larger revolver, along with our $20 billion target cash, will provide appropriate liquidity to enable consistent investment in a downturn to generate strong results," said Chuck Stevens, GM executive vice president and chief financial officer. "In addition, we will also have the financial flexibility within the revolver for potential opportunities that may emerge to advance our strategic plan."
The company reaffirmed its capital allocation framework, including targets for cash of US$20bn and available liquidity of US$30bn to US$35bn needed to withstand a severe economic downturn. In addition, buybacks executed under the company's common stock share repurchase program will continue to be funded with available free-cash-flow.
GM's move comes as concerns rise over auto industry growth prospects in China and also North America – two regions that have boosted GM's bottom line in recent years. Analysts note that the US vehicle market is close to topping out at just under 18m units while the Chinese vehicle market is likely to see single digit growth this year and could decline next year when a purchase tax cut expires.
A total of 44 financial institutions from 13 countries participated in the broadly syndicated transaction, underscoring the global scope of GM's operations.
