Ford Credit, GMF stocked with +$54B of liquidity, JP Morgan reports

The General Motors Co. Flint Assembly plant stands idle in Flint, Michigan, U.S., on Monday, March 23, 2020. The auto industry is escalating its push for U.S. assistance to help weather the impact of a global pandemic that has halted or will soon stop production at 42 out of 44 plants that assemble vehicles in the country. Photographer: Anthony Lanzilote/Bloomberg

Ford Motor Credit Co. and GM Financial have more than $54 billion of liquidity, JP Morgan estimated today.

This is a key liquidity marker. The coronavirus pandemic has battered the U.S. automotive sector, which makes the liquidity of two crucial auto finance providers all the more important to the long-term financial health of the sector.

In a research note published this morning, JP Morgan reported that Ford Credit is likely to hold “closer to $30 billion by our calculation” of liquidity, based on its remaining cash, revolver availability and remaining commitments on asset-backed facilities.

A Ford Credit spokeswoman declined to comment, referencing the company’s practice to disclose its liquidity on a quarterly basis. (Find Ford Credit’s last disclosures here.)

GMF, meanwhile, has about $24 billion of liquidity, according to JP Morgan. JP Morgan based its estimate on a March 24 General Motors Co. announcement that the OEM would draw down about $16 billion on its revolving credit facilities. At that time GM said that GM Financial expects to end the first quarter of 2020 with a similar level of liquidity to its yearend 2019: around $24 billion. GMF indicated that this approximately $24 billion of liquidity should “support at least six months of cash needs, including new originations, without access to capital markets.”

A GMF spokeswoman confirmed JP Morgan’s estimate, saying it expects to end the first quarter with “similar levels of liquidity.” The spokeswoman added that “GMF always targets liquidity to support at least six months of cash needs, including new originations, without access to capital markets.”

GMF was the third-largest auto finance company in the nation with nearly $79 billion of outstandings at the end of last year, while Ford Credit was ranked No. 5 with about $74.5 billion of outstandings, according to Auto Finance Big Wheels, Auto Finance News’ annual ranking of auto finance companies.

U.S. light vehicle sales are on track to decline about 15% as a result of the pandemic. JP Morgan “sees downside to this forecast.” And that means liquidity for auto finance providers is paramount. The investment bank sees heightened risks for the auto finance sector should the industrywide production shutdown last longer than three months. Such an extended shutdown “could severely stress automakers’ liquidity profiles on account of these companies’ high fixed cost bases, resulting in additional cash burn beyond the initial unwind of negative working capital,” according to JP Morgan.

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