Italy approves $7.1 billion state-backed Fiat Chrysler loan
Italy’s finance ministry approved a 6.3 billion-euro ($7.1 billion) credit facility for Fiat Chrysler Automobiles NV, setting the stage for Europe’s biggest government-backed financing to a carmaker since the start of the coronavirus pandemic.
The guarantee was authorized by Finance Minister Roberto Gualtieri, the ministry said in a statement on Wednesday.
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Italy’s top lender Intesa Sanpaolo SpA gave the green light to the loan last month. Trade-credit insurer Sace SpA will guarantee 80% of the amount.
The financing will be used exclusively for the carmaker’s Italian activities. The company will use the funds for workers’ salaries, to pay suppliers and for planned investments at domestic facilities. Italy’s automotive supply chain includes 200,000 small and medium-sized companies and the domestic industry generates more than 100 billion euros in annual revenue.
“It is a systemic operation which aims to preserve and strengthen the Italian automotive supply chain and to relaunch investments, innovation and employment in a strategic sector," Gualtieri said. “The government will verify the implementation of the commitments undertaken by FCA Italy."
Fiat Chrysler burned through $5.5 billion in the first quarter, and the Italian-American company and French peer PSA Group last month scrapped a plan to pay out 1.1 billion euros in dividends as part of their merger agreement.
Last year, Fiat and the maker of Peugeot and Citroen cars agreed to combine to create the world’s fourth-biggest carmaker, as the manufacturers prepare to shoulder the costly investments in new technologies transforming the industry. Fiat’s Agnelli family will be the biggest shareholder in the new company, while PSA’s Carlos Tavares will be chief executive officer.
The European Union started earlier in June an investigation on the merger after regulators said the tie-up could reduce choice for small vans.
General Motors Co. and Ford Motor Co. have tapped credit lines to stock up on billions of dollars in cash. In April, Daimler AG secured a 12 billion-euro credit line, and Renault SA struck a 5 billion-euro loan guarantee deal with the French state.
The pandemic has hit the automotive industry hard. Car sales fell 57% in Europe in May after a 78% drop in April. The exact shape of a potential recovery is still unclear as carmakers from Volkswagen AG to Fiat prepare to announce results for what likely will be a devastating second quarter.