FCA: conditions linked to the loan guaranteed for 6.3 billion euros

The Italian Ministry of the Treasury is about to approve the loan needed to support FCA Italy’s production activities.

Fiat 500 – (photo by Fiat)

During the week, the Ministry of the Treasury’s approval is expected on the maxi loan requested by Fiat Chrysler Automobiles (FCA), to be used to support the production activities of FCA Italy, the subsidiary of the group operating in Italy. A 6.3 billion euro loan, disbursed by Intesa Sanpaolo and guaranteed by the State through Sace, a company of the Cassa Depositi e Prestiti, based on the provisions of the Liquidity decree approved to revive the economy during the crisis due to the coronavirus. On May 26, FCA collected the OK from the credit institution, followed, two days later, by the green light by Sace. The story generated many controversies, addressed both to FCA and to the Italian government.

FCA loan conditions

The go-ahead for the operation is subject to a series of conditions that FCA must comply with, starting from the periodic reports on the use of the loan. If these conditions are not respected, FCA could be sanctioned. As pointed out by the Minister of Economy Roberto Gualtieri at the hearing before the bicameral Commission on banks, the loan must be used to support Italian activities, starting with the protection of jobs in production sites in Italy, the payment of suppliers, in addition to the financing of national investments, in particular for electric vehicles. This seems to be in line with what FCA stated in a note dated 16 May, in which it expressed its intention to use the loan “exclusively to the Italian activities of the FCA Group and to the support of the automotive supply chain in Italy”.

Sanpaolo and Sace

Last week confirmation also came from the heads of Intesa Sanpaolo and Sace. As stated by the managing director of the credit institution Carlo Messina “We could have given credit to 10 or 20 thousand companies with 100 thousand euros for each, but with the operation of the credit to FCA of over 6 billion guaranteed by the state through Sace we support all the car supply chain, with the guarantee of destination of funds. This operation is a pillar to safeguard the national economic system in this emergency situation, otherwise instead of marking a 10% drop in GDP, we risk accusing it by 15% or more”. Messina added that the Intesa Sanpaolo loan structure “has destination constraints, such as paying employees’ salaries, and we are talking about 50 thousand people, or paying suppliers, which are 400 thousand and can become a million considering the whole indirect supply chain. We are talking about a sector that generates 6% of the national GDP.” Finally, Messina recalled that five billion investments are linked to the operation. A point on which the CEO of Sace Pierfrancesco Latini returned, listened to in the Senate Industry Committee. “An additional investment level of around 5 billion has been defined connected to the investment plan in Italy for projects for the implementation of new technologies related to electrification, connectivity and containment of emissions for the construction of the group’s electric models. Commitments that obviously remain post-merger (with PSA, ed). These commitments will be contracted in the loan contact with Intesa and to which a periodic reporting mechanism will be associated, following which, in the event of default, a remedial process will start which can go as far as the repayment of the entire loan is accelerated”.

FCA in Italy

The white smoke on the loan has given wings to FCA shares, which has archived a week in great dust on the lists. Prices have risen by 16% in the last 5 sessions, hitting peaks for almost three months. From the lows of March 19 to 5.51 euros, the stock has even jumped by 67%. On Friday 5 June, the share marked an eloquent + 5.7% at 9.20 euros under the push of the imminent go-ahead for the maxi-loan of 6.3 billion euros with a 80% public guarantee. An upward push which has probably contributed to the increasingly concrete possibility of a plan for new incentives for car scrapping in Italy which also involves the Euro 6. In detail, the government would disburse up to €4 thousand for the purchase of a new Euro 6 car by the end of 2020, which will drop to € 2 thousand in 2021 (half paid by the State and dealers ) in case of car scrapping with at least 10 years; the abolition of taxes for transfers of used cars is also envisaged. For the green light to these incentives, the yes of the M5S is still missing which, in principle, has always been favorable to incentives exclusively for hybrid and electric. FCA Italy, the Italian subsidiary of Fiat Chrysler, manages 16 factories and 26 research and development centers, with 55,000 employees in all. In addition, according to an estimate by FCA, the related activities are represented by 5,500 companies with 200,000 employees in all, to which approximately 120 must be added.

Contact the author: emmettwallace@wheelsjoint.com

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