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Watch: Assessing Liquidity And Potential Business Transfer Repercussions

May 8, 2020
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As businesses restart and begin operating in the “new normal,” understanding the unique challenges and strategies of crisis management and business continuity planning is paramount. This includes monitoring and managing cash flow and liquidity. Significant operational and financial strategies need to be implemented, including overhead and other cost reduction initiatives, footprint consolidation, and logistics and distribution streamlining. Simultaneously there is an increased need to understand the status of the supply chain, to identify critical and stressed suppliers, and to find strategic solutions ranging from cost reductions to liquidity support and/or business transfer.


Phil Goy, Director, Financial Restructuring and Supplier Risk Advisory, KPMG
Florian Matena, Senior Associate, Financial Restructuring and Supplier Risk Advisory, KPMG
Mike Kamsickas, Managing Director, KPMG Operations Center of Excellence

 How Manufacturers Can Understand Liquidity Amid COVID-19

Automotive manufacturers have multiple factors to consider and carefully plan as they prepare to resume operations. Understanding how to navigate pressure on cash and liquidity is a critical step.

In a Detroit Regional Chamber Restart Michigan Webinar, KPMG experts shared how manufacturers need to assess their balance sheet on ways to improve cash flow despite the increasingly challenging operating environment. First, it’s important to understand your own and your suppliers’ liquidity.

Ask the following questions:

  1. How has the company been funded during the shutdown?
  2. What do cash and credit availability look like?
  3. Is any debt due soon?
  4. How much liquidity is needed to restart in the “new normal”?
  5. What sources of liquidity remain?
  6. What is the risk of running out of funds?

The problem is, while demand is reducing along with sales volumes, costs to manufacture are increasing due to increased overhead such as PPE, reduced efficiency due to social distancing, and one-time costs. To address this, manufacturers must manage their capital resources carefully to balance production dynamics.

To position themselves for success, manufacturers should:

  1. Cut costs and reduce spending on a short-term basis.
  2. Create a detailed forecast of cash flow and liquidity, taking into account various scenarios considering higher operating costs.
  3. Use KPIs and data to focus on problem-solving performance degradation.
  4. Raise the bar of standard work and perform audits of interactions between leadership and plant-floor operators.

Learn more:

Managing in the New Normal: Financial and Operational Considerations for Manufacturers Post COVID-19

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