The report, which was first published by Standard & Poor’s, found that Ford and GM together invested $65 billion – $35 billion for GM and $30 billion for Ford – and it appears the two companies do not intend to formally borrow credit. to fund their green businesses. Instead, the two auto giants are drawing cash from their operating cash flow in an effort to reduce risk and drive long-term growth.
Reduce risk and boost long-term plans
While paying on credit offers convenience and the ability to reverse the proverbial trend, it also carries additional risk and makes a business vulnerable to sudden market movements. Ford and GM know firsthand what risk can bring, thanks in part to the financial crisis of 2008. However, paying directly on cash flow eliminates the risk of borrowing, which will help give thumb in a company’s stock price since it will operate on a more secure long-term basis.
“The short answer is they do it because they can,” said Nishit Madlani, head of the automotive sector at bond rating agency Standard and Poor’s. “The popularity of trucks [since the pandemic began] and high prices give them confidence.
Some of that confidence comes from some past borrowing the two companies took in 2020, as fears of outright economic implosion gripped the world during the COVID-19 pandemic. Once it became clear that the drop in sales was not going to be as severe as initially feared, the ensuing sales rebound allowed both companies to pay off debt while downsizing sedan models. unprofitable and other deadweight allowing them to focus heavily. on trucks and SUVs that have seen a rapid increase in sales and demand.
Stock prices will also see an increase 
In addition to the immediate boost in profits that the truck and SUV markets have brought to Ford and GM, this increased success will also help boost the stock prices of both companies. Although the era of both companies trading above $100 per share is still a long way off, it would help end what can be seen as a period of stagnation for both companies. GM, for example, currently trades at $53.18 per share, but the brand’s stock hasn’t broken through the $65 mark in the past five years.
As for Ford, its stock is currently trading at $20.65 a share, and for the past five years it has not breached that barrier. Reduced borrowing and the untapped potential of the electric vehicle segment as a whole could help Ford and GM dramatically increase their stock prices. This last reason, in particular, will play a vital role in this rejuvenation, as GM’s Ultium technology and Ford’s rapidly evolving EV and lifestyle technology aim to appeal to a wider range of customers looking to upgrade from a gasoline vehicle to a fully electric vehicle.
Photo credit: Ford and General Motors
Carl Malek has been an automotive journalist for over 10 years. In addition to his specialization at Ford, he grew up in a house of General Motors and is very familiar with their products as well. Contact Carl on Twitter at @CarlMalek3, to instagram and Facebook for automotive news to send news tips.
