People walk past a Deutsche Bank office in London, Britain July 8, 2019. Picture: REUTERS / SIMON DASON
People walk past a Deutsche Bank office in London, Britain July 8, 2019. Picture: REUTERS / SIMON DASON

New York — Deutsche Bank’s Emmanuel Rosner downgraded General Motors (GM) for the first time since he initiated coverage on the vehicle maker more than a year ago, warning that it would run low on cash if production shutdowns continue for months.

GM and Ford have only 15-17 weeks of liquidity to ride out current conditions before they hit the minimum levels of cash they need to run their business, Rosner said in a report on Tuesday. He cut his rating on GM to hold and lowered his price target to $25 from $41.

“Despite considerable declines in equity values since the start of the Covid-19 crisis, we see additional downside risk for US autos stocks, in light of significant liquidity concerns from the prolonged production shutdown,” Rosner wrote.

GM rose as much as 8.8% to $21.28 shortly after the open of regular trading amid a broader rally in US equities. The carmaker’s shares had declined 47% in 2020 by Monday’s close.

Rosner cautioned that US vehicle sales in April could slow to a seasonally adjusted annualised rate of four-million to five-million vehicles, compared with March’s pace of 11.4-million. A recovery is likely not to happen until there is easing of the shelter-in-place restrictions across the US, which would enable production and demand to resume.

“Earliest timing would likely be May or June,” he wrote.

Rosner slashed estimates for 2020 earnings before interest, taxes, depreciation and amortisation (ebitda) across his coverage universe by an average of 30%.

Downgrades have been rare for GM in general, according to data compiled by Bloomberg. Fifteen analysts recommend buying the shares, with four rating the stock a hold and zero advising investors to sell.

Bloomberg