Coronavirus – FCA, banks 3.5 billion to tackle the emergency

Fiat Chrysler moves to tackle the economic and financial impact of the pandemic of the coronavirus. The group, in fact, has signed a new credit line of € 3.5 billion.

A bridge loan. The funding has been made available by two banks for general corporate needs and to the needs related to the working capital of the group” and is structured as a ‘bridge’ agreement to support the access to the capital market”. In essence, it is a loan the so-called “bridge” because it allows any entrepreneurial reality, to overcome a particular extraordinary moment – like the current one – in, lack of normal financing channels, such as the market for bond issues. The line of credit can be “pulled”, i.e. request from company, in a single tranche by $ 3.5 billion, has an initial duration of 12 months, with the possibility of an extension for a further six months, and can be added to 7.7 billion, including 1.5 billion in “bilateral” that the FCA “has started to use”.

A field in motion. The manufacturer is Italian-american, and he pointed out how the operation will confirm “the strong support from the major banks to report international in the extraordinary circumstances of the present moment”, is not the only one to have put in place initiatives with financial resources to cope with the health emergency. On the other hand, the automotive industry is in a extremely difficult: government measures to contain the contagion have created, at the same time, supply disruptions and, above all, a collapse of unprecedented demand. The first consequence was the closure of numerous factories in Europe, the Americas, Africa and Asia that has in turn produced the worst nightmare for the manager of a sector that is certainly not known for the ability to “generate cash”: in essence, the companies are “burning cash”, having regard that the collections are equal to zero, but some tasks still need to be incurred (machinery, robots, assembly lines must, for example, be subjected to continuous checks and maintenance works).

The initiatives of the Ford and GM. In such context, the first company to move was the Ford motor company. The blue Oval, that at the end of 2019 was comprised of a $ 20 billion cash and $ 30 billion of liquidity, has “invoked” the full amount of 13.4 billion dollars of credit lines and the additional 2 billion of additional funding to offset the impact of the closings on net working capital. Also, have been suspended dividend payments to give priority to the “financial flexibility, short-term investments, for the launch of new models and strategies for long-term growth. Ford has also cleared the target for 2020, and launched, with the us dealers, sales promotion, followed by the other competitors: a six-month postponement for the payments of the instalments of the loans granted by Ford Credit for the purchase of vehicles. Similar actions have been announced by General Motors, which has attracted about $ 16 billion of credit lines.

Need liquidity. The moves of the two manufacturers in american confirm the extreme need for liquidity of the companies in the current historical moment. Other realities of the automotive industry, have suspended dividends: the case of Italian Brembo or the u.s. Aptiv. Some have, instead, confirmed, at least for now. “Our proposal for a dividend of 90 euro cents per share has been presented and there is no reason to change anything at this point,” said the ceo of Daimler, Ola Källenius, excluding, among other things, a scenario already addressed in the past by GM and by Chrysler: the intervention of the State. “Currently, Daimler does not need state aid. We have a high level of liquidity, has made it clear Källenius.

The case of Renault. An intervention by the state is not excluded from France. Economy minister Bruno Le Maire has gone beyond speaking explicitly of the nationalization of French firms in case it was necessary to defend the employment: “I will Not hesitate to use all means at my disposal to protect the large French companies. You can go through a recapitalisation or a direct investment. Can I also use the term nationalization, if necessary.” The words of Le Maire did take immediately the alarm at the top of the large State enterprises, starting from the Renault, passed into the hands of the public in 1945, and only in 1990 returned to be a private company, albeit with a strong state participation. The president Jean-Dominique Senard has indicated the possibility of asking for state guarantees or loans, such as the one from 3 billion obtained during the crisis following the bankruptcy of Lehman Brothers, but has ruled out a renationalisation of both the order of the day, remembering that in 2008/2009, the Renault has never arrived at the point of return into the hands of the public”.

Source: Quattroruote.en – Edited by Anthon K.