FCA postpones shareholders’ meeting as focus shifts to improving cash reserves

FCA postpones shareholders’ meeting as focus shifts to improving cash reserves
  • FCA wants to improve its cash reserves ahead of its merger with Groupe PSA.
  • The car maker hopes to qualify for £350 billion aid from the Italian government.
  • Fiat Chrysler is expected to suspend its £970 million worth of ordinary dividends.

As Coronavirus continues to weigh on sales, automakers Fiat Chrysler (BIT:FCA) and Groupe PSA delayed their shareholders’ meetings as both companies focus on improving cash reserves before moving on with the planned merger.

As per the sources, FCA and PSA are now seeking support from their banks. FCA is also relying on the Italian government approved debt guarantees. Italy approved over £350 billion in bank loans and liquidity to cushion the economic blow to businesses due to Coronavirus. The Italian-American car manufacturer expects to be eligible for the government scheme.

FCA Announced To Have Secured A £3 Billion Credit Line In March

The ongoing health emergency has brought the global auto industry to a near halt with the majority of manufacturers having suspended production.

FCA had announced in the last week of March that it secured around £3 billion in financing. The initial term of the credit line was reported 12 months with a prospect of up to 6 months of extension. The financing was in addition to FCA’s existing £6.80 billion worth of credit facilities.

According to the experts, if FCA resorts to the government aid, it will have to suspend its ordinary dividend payments as per the requirements of the rescue loan. As FCA delayed the shareholders’ meeting until June 2020, analysts now expect a greater chance that the automaker will postpone or even cancel its £970 million worth of ordinary dividends.  

In separate news, Fiat Chrysler Automobiles also said on Monday that its factories in the United States and Canada will remain closed until May 4th due to the rising risk of Coronavirus. Originally, the company had planned on resuming operations on April 14th.

UAW Union Had Pressured Detroit Car Manufacturers To Shutdown Factories

FCA had first closed manufacturing plants in North America on March 18th. The decision had come as United Auto Workers (UAW) union pressured all 3 Detroit car manufacturers to shut down factories and protect their workers against the health hazard.

As per FCA, an announcement highlighting its decision for its factories in Mexico will be made later.

At £6.38 per share, FCA is currently trading over 10% higher as compared to its close on Monday. In terms of year to date, however, the company is still around 45% down in 2020. At the time of writing, FCA has a market cap of £9.88 billion and a price to earnings ratio of 4.21.

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