America's biggest automakers, General Motors and Ford, are preparing for an economic downturn, according to a report from Reuters.
The companies reported as much on Tuesday, citing the ongoing trade war between the US and China as a reason for a potential global recession.
Back-and-forth tariffs have made it so that the cost of raw material needed for the global auto industry has increased. The industry was already struggling due to weak demand, both in the US and China, and the trade war between the two countries could make things significantly worse.
Ford has a cash buffer of $20 billion to keep them afloat should the economy drop, while GM has $18 billion that would allow them to pay two years worth of dividends in such a case. That is according to Ford North American Chief Financial Officer Matt Fields and GM finance chief Dhivya Suryadevara, who both spoke at a J.P Morgan Conference in New York this week.
GM has mimicked both moderate and severe economic downturn scenarios so they could be prepared for a crash similar to the one that came about in 2008-2009.
“It’s something that we continually keep watching and updating to make sure that we’re all set for when the downturn does come,” he said, adding that the company doesn't see a downturn as being imminent.
The manufacturing company will explore differing non-essential capital expenditure and selling its vehicles cheaper if it ever comes to that, as well as other measures.
Ford, meanwhile, is "proactively" evaluating future moves and working with economists to plot the severity of a possible economic crash.
The fears over a recession are quite real on Wall Street this year, following President Donald Trump setting a new round of tariffs at the beginning of August. Hopefully, things get better before they get worse.