MILAN — Fiat Chrysler said on Thursday it has agreed a new credit facility with two banks, at a time when major carmakers are having to shut down plants, losing revenue as demand slumps in the wake of the coronavirus.
Most of FCA’s plants around the world are currently shut in response to the virus emergency. Italian investment firm Exor, which controls FCA, said on Wednesday that the temporary closures might continue and increase depending on how the coronavirus outbreak develops.
FCA said the credit facility would be available “for general corporate purposes and for working capital needs” of the group and that it was structured as a “bridge facility” to support its access to capital markets.
“This transaction confirms the continued strong support of FCA’s international key relationship banks in the current extraordinary circumstances,” the automaker said in a statement, without making any explicit link between the new facility and the impact the virus is having on the global economy.
The facility can be drawn in a single tranche of 3.5 billion euros ($3.8 billion), with an initial 12-month term which can be extended for further six months. It adds to existing credit facilities worth 7.7 billion euros, including lines for 1.5 billion euros that the company has started to draw down, FCA said.
FCA is in merger talks with Peugeot owner PSA to create the world’s fourth biggest carmaker. The deal is expected to be finalized by the first quarter of next year.
Equita’s analyst Martino De Ambroggi said that, based on his new assumption of a 10% drop of global auto market this year, the crisis triggered by the coronavirus would impact the merged automaker’s free cash flow by over 5 billion euros.
Earlier this week, General Motors announced it will draw about $16 billion from its credit lines in a bid to beef up liquidity amid rising business impact from the fast-spreading coronavirus outbreak. And last week, rival Ford abandoned its 2020 forecast and said it was drawing down $15.4 billion from two credit facilities to bolster its balance sheet.