With their sales hit by the coronavirus outbreak, automakers Fiat Chrysler and Peugeot’s owner PSA have delayed their shareholder meetings and are looking at ways to increase cash reserves ahead of their planned merger.
The two automakers have turned to their banks to secure much required cash, and Fiat Chrysler (FCA) is looking at debt guarantees that the Italian government authorized on Monday to support regional companies, a source with knowledge of the matter informed Reuters.
FCA, whose legal headquarters is located in the Netherlands, runs several plants in Italy and may qualify for the government plan which offers over 400 billion euros worth of liquidity and bank loans to firms hit by the pandemic, the source said, cautioning no decision had been made.
The crisis triggered by the virus has virtually eliminated demand for new vehicles, pushing automakers to temporarily stop most production.
In late March FCA secured a 3.5 billion euro credit line, with an initial 12-month term that can be increased six months. This added to present credit facilities worth 7.7 billion euros.
The Italian-American firm, chaired by John Elkann, scion of the Italian Agnelli family, would need to slash its ordinary dividend if it decides to pursue state aid from the country.
The emergency decree states companies looking to seek Italy-backed loans must avoid approving dividend payments for a year.
FCA’s decision to delay the shareholders’ meeting to late June has experts speculating that its ordinary dividend worth 1.1 billion euros could be cut or postponed.
PSA, led by Carlos Tavares, stated on Monday it had agreed new credit lines worth about 3 billion euros. It is sitting on undrawn credit facilities are worth about 3 billion euros.
