Italy has approved a decree offering state guarantees for a 6.3-billion euro ($7.1 billion) loan to Fiat Chrysler’s (FCA) Italian unit, the Treasury announced, paving the way for the largest crisis loan to a European carmaker.
The formal announcement follows an endorsement by the country’s audit court and brings to an end a lengthy approval procedure for the loan, which has drawn criticism in Italy.
By providing state support, Rome “aims to preserve and strengthen the Italian automotive supply chain,” Economy Minister Roberto Gualtieri said in a statement.
FCA’s Italian division has tapped Rome’s COVID-19 emergency financing schemes to secure a state-backed, three-year facility to help it weather the crisis triggered by the coronavirus pandemic. The aid will also help Italy’s broader car sector, in which about 10,000 businesses operate.
“100% of the money this facility provides will be directed to our Italian business … as we continue a transformative shift to a new electric and hybrid powered future,” said Pietro Gorlier, FCA’s chief operating officer for Europe, the Middle East and Africa.
The loan will be disbursed by Italy’s biggest retail bank Intesa Sanpaolo, which has already authorised it pending the approval of guarantees the government will provide on 80% of the sum through export credit agency SACE.
The request for state support sparked controversy because FCA is working to merge with French rival PSA and the holding company for the Italian-American carmaker is registered in the Netherlands. FCA’s global brands include Fiat, Jeep, Dodge and Maserati.
Gualtieri said FCA would have to meet commitments on investments and jobs, but declined to say whether the Treasury had imposed conditions affecting FCA’s planned 5.5 billion euro extraordinary dividend, a key element in the merger with PSA.
Italian politicians have called the dividend into question, although it should be compatible with the terms of the financing, because it is not due until 2021 and would be paid by FCA Italy’s Dutch parent company, Fiat Chrysler Automobiles NV.
Meanwhile, Peugeot maker PSA’s boss Carlos Tavares said on Thursday he was confident the merger of the French carmaker and Fiat Chrysler (FCA) would go ahead as planned and yield synergies of at least 3.7 billion euros ($4.2 billion).
“The timetable of the merger with FCA is being strictly respected,” Tavares told PSA’s annual shareholders meeting.
He added he was confident the deal would be finalised during the first quarter 2021 “at the latest”.
Commenting on expected synergies from the deal, he said 3.7 billion euros was a “floor”.
Last week, European Union antitrust regulators opened a four-month investigation into the proposed $50 billion merger, saying it may harm competition in small vans in 14 EU countries and Britain.
The two carmakers had declined to offer concessions to allay the EU competition enforcer’s concerns during its preliminary review of the deal.
The deal has already received the green light in the United States, China, Japan and Russia.