The Italian government on Wednesday approved support for a $7.1 billion (€6.3 billion) loan that will help support Fiat Chrysler Automobiles NV’s operations in the southern European country and some investments keys, the automaker announced on Wednesday.
The approval ends a long process and grants one of the largest crisis loans in Europe to a carmaker. The coronavirus pandemic, which has hit Italy hard, has weighed on automakers’ cash flow due to prolonged shutdowns at its factories around the world. Fiat Chrysler and its rivals have earmarked billions from lenders to protect their books and help them increase production.
FCA’s Italian business signed the new three-year credit facility with Intesa Sanpaolo, Italy’s largest banking group, which is 80% guaranteed by the Italian Export Credit Agency. The automotive sector represents 6.2% of the country’s economy.
“Faced with an unprecedented crisis,” said Pietro Gorlier, FCA’s managing director for Europe, in a statement, “this is an example of Italy coming together to safeguard a vital industrial ecosystem.”
The deal has sparked controversy as the parent company is incorporated in the Netherlands and promises to pay a $6.1 billion dividend to its shareholders as part of its binding deal to merge with French automaker Groupe PSA, manufacturer of Peugeot and Citroën vehicles.
The funds are dedicated exclusively to the automaker’s operations in the country, according to a company statement, and will support more than 10,000 small and medium suppliers, many of whom are also cash-strapped.
The funds will also support Fiat Chrysler’s investment in alternative powertrains, including plug-in hybrid and electric vehicles of all its brands manufactured there.
The automaker has taken several measures to preserve cash. It took out $3.8 billion in credit facilities in April, and its board had decided not to pay a $1.2 billion dividend. In addition to stopping certain projects and lowering marketing expenses, managers are suffering salary cuts and employees are seeing 20% of their income deferred for up to three months.