The top two U.S. automakers are preparing for a possible economic downturn, the companies said on Tuesday, as an ongoing trade war between Washington and Beijing fuels fears of a global recession.
Tit-for-tat tariffs have increased raw material costs for the global auto industry, which is already dealing with weak demand in both China and the United States.
Ford Motor Co (F.N) has a cash buffer of $20 billion for a potential downturn event, Ford North American Chief Financial Officer Matt Fields said at a J.P. Morgan Conference in New York.
General Motors (GM.N) has $18 billion in cash, with the potential to pay two years worth of dividends, the company’s finance head, Dhivya Suryadevara, said at the conference.
GM said they’re considering “a shift to lower-priced vehicles” depending on how bad the downturn is. Both companies have significantly curtailed production of small, affordable cars in these Good Times, with Ford bailing on sedans entirely, because they make way more money from trucks and SUVs. Recessions are hard to weather; doubly so if your company doesn’t sell anything cheap.