Fiat seeks $6.3bn Italian state-backed loan to offset coronavirus hit

The company’s Italian unit is in discussions with Intesa Sanpaolo as the lead lender for the three-year credit line

Workers at Fiat Chrysler Automobiles plants in Italy. The car maker said it is in talks to obtain an Italian state-backed credit line of as much as €6.3 billion. AP

Fiat Chrysler Automobiles and Italy’s Intesa Sanpaolo are negotiating a state-backed credit line of as much as €6.3 billion (Dh25bn) in Europe’s biggest government-guaranteed financing for a carmaker since the coronavirus pandemic.

Italy’s top lender would lead a three-year loan facility to help finance the manufacturer’s business in the country, Fiat Chrysler said in a statement. Sace, Italy’s trade-credit insurer, will guarantee 80 per cent of the amount in a mechanism that would need approval by the Finance Ministry.

Carmaking is among industries that have been hit hardest by the Covid-19 crisis, which forced factory stoppages and crippled sales in markets from China and Europe to the US Fiat Chrysler burned through $5.5bn in the first quarter. The Italian-American company and French peer PSA Group last week scrapped the €1.1bn dividends that each agreed to pay as part of their 2019 merger agreement.

The financing would “provide further support to some 10,000 small and medium enterprises in the automotive supply chain in Italy following the reopening of the company’s Italian plants beginning at the end of April,” Fiat Chrysler said in its statement late Saturday.

Companies worldwide have borrowed almost $600bn since late March to bolster their balance sheets. But no sector has been more aggressive than the auto industry, which has tapped banks for $100bn by either making drawdowns from existing facilities or seeking new loans.

General Motors and Ford Motor have tapped credit lines to stock up on billions of dollars in cash. Last month, Daimler secured a €12 billion credit line and Renault struck a €5bn loan guarantee deal with the French state.

Governments across Europe have provided support for over €22 billion in corporate loan facilities through mid-May.

Fiat Chrysler has raised almost €10bn to help it weather the pandemic. Earlier, it took out a new, €3.5bn loan and drew down €6.25bn from a revolving facility. Separately, the company is planning to repay part of the facility via a bond sale of as much as €1bn, people familiar with the matter said last week.

Fiat, which stands for “Fabbrica Italiana Automobili Torino,” or Italian factory based in Turin, has faced criticism since shifting its center of gravity out of Italy following its merger with Chrysler. The carmaker in 2014 moved its legal headquarters to the Netherlands and its tax residence to the UK.

In Italy, Fiat employs about 55,000 workers at 16 plants and 26 research and development sites. Some 200,000 jobs at 5,500 suppliers are linked to Fiat’s local operations.