Fiat Chrysler gets $7.1 billion loan backed by Italy's government
Italy's government on Wednesday approved the backing of a $7.1 billion (6.3 billion euros) loan that will help to support Fiat Chrysler Automobiles NV's operations in the southern European country and some key investments, the automaker said Wednesday.
The approval ends a lengthy process and grants one of the largest crisis loans in Europe to an automaker. The coronavirus pandemic, which hit Italy severely, has taken a toll on automakers' cash flow from prolonged downtime at its plants globally. Fiat Chrysler and its rivals have reserved billions from lenders to safeguard their books and assist as they ramp up production.
FCA's Italian business has signed the new three-year credit facility with Intesa Sanpaolo, Italy's largest banking group, that is 80% guaranteed by Italy’s Export Credit Agency. The auto sector represents 6.2% of the country's economy.
"Faced with an unprecedented crisis," Pietro Gorlier, FCA's chief operating officer for Europe, said in a statement, "this is an example of Italy coming together to safeguard a vital industrial ecosystem."
The deal has drawn controversy because the parent company is incorporated in the Netherlands, and it promises to pay out a $6.1 billion dividend to its shareholders as a part of its binding agreement to merge with French automaker Groupe PSA, maker of Peugeot and Citroën vehicles.
The funds are dedicated exclusively to the automaker's activities in the country, according to a statement from the company, and will support more than 10,000 small and medium suppliers, many of whom are also liquidity-strapped.
The funds also will support Fiat Chrysler's investment in alternative powertrains, including plug-in hybrid and electric vehicles across all of its brands manufactured there.
The automaker has taken several steps to preserve cash. It took out a loan of $3.8 billion in credit facilities in April, and its board had decided against issuing a $1.2 billion dividend. In addition to halting some projects and lowering marketing spending, executives are taking pay cuts and salaried employees are seeing 20% of their incomes deferred for up to three months.