FCA approved for 6.3 billion EUR Loan for FCA Italy with 80% guaranteed by Italy. How it stacks up to other FIAT/Chrysler guarantees/recues...

AlexB

Well-known member
Italy has approved a decree offering state guarantees for a 6.3-billion euro ($7.1 billion) loan to Fiat Chrysler’s (FCA) (FCHA.MI) Italian unit, the Treasury said on Wednesday, 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 authorized it pending the approval of guarantees the government will provide on 80% of the sum through export credit agency SACE.

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.
Italy approves guarantees for $7.1 billion loan to Fiat Chrysler



Chrysler loan guarantee by the U.S. Government of 1980 was at the interest rate of 10.35%, while this loan that's 80% guaranteed by the Italian Government will be priced below 2% interest.
Chrysler loan guarantee included stock warrants for U.S. Government of Chrysler stock, while the Italian Government gets no warrants from this'' 80/20'' Loan.

Chrysler loan guarantee barred dividends to shareholders, but this ''80/20'' Loan allows the special dividend to be paid to FCA shareholders as part of FCA-PSA Merger.
Chrysler loan guarantee placed limits on executive compensation, while a FIAT loan guarantee by the Italian Government in early 90's not only placed limits on executive compensation, but placed rules on corporate Governance & Management of FIAT including barring Gianni Agnelli (John Elkann's grandfather) from retiring from FIAT until the loan was repaid. No such rules exist on this
'' 80/20'' loan to FCA Italy.

The ''80/20'' loan guaranteed by the Italian Government for FCA Italy bans the sale/transfers of Italian assets & operations of FCA, and prohibits Italian Job cuts/eliminations. The ''80/20'' loan guarantee brings back ''ringfencing/Firewall'' but this time for the Italian side of the house....no money can be mix up and sent to the rest of FCA (including North America).
It is unclear at this stage whether or not the '80/20'' loan guarantee is secured by all or some of FCA Italy or is an unsecured loan, the Chrysler loan guarantee of the 80's as well the FIAT loan guarantee of the early 90's was secured by nearly all assets & operations of Chrysler & FIAT respectively.

Seems to way better terms than past guarantees, but it adds complexity to FCA-PSA Merger, including how PSA's cash will be handled.
While its better than the interest rates GM & Ford are paying on Wall Street barrowings (upper 6%-low 9%), but it bad news for Opel/Vauxhall plants in U.K. and Spain.
 

Bili

Official Pilot
Staff member
@AlexB

It adds no complications to PSA-FCA deal. FCA took it because this is cheap money and actually Italy was the one which made this available for all Italian companies. It would be silly not to take this relatively cheap credit line.
 

Bili

Official Pilot
Staff member
FCA enters into €6.3 billion credit facility with Intesa Sanpaolo, supporting the restart and transformation of Italy’s automotive sector

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  • FCA Italian companies confirm commitment to implement extensive investment plan for Italy, most of which has already been initiated.
  • New initiatives include development of the new hybrid engine module at Termoli, which will equip the Jeep Renegade, Jeep Compass and Fiat 500X produced at Melfi.
FCA Italy S.p.A. ("FCA" or "the Company") - a wholly owned subsidiary of Fiat Chrysler Automobiles N.V. (NYSE:FCAU / MTA:FCA) - and other Italian companies in the FCA Group announce that they have signed a 3-year, €6.3 billion credit facility with Intesa Sanpaolo, Italy’s largest banking group, the proceeds of which will be dedicated exclusively to FCA’s activities in Italy and to support the more than 10,000 small and medium enterprises that make up the Italian automotive sector. The facility will be guaranteed by FCA N.V.

The facility will be 80% guaranteed by SACE, Italy’s Export Credit Agency, under the Italian Government’s Liquidity Decree (“Decreto Liquidità”), as overseen by the Ministry of Economy and Finance - MEF, and the Ministry of Economic Development – MISE. The funds under the facility will be available upon issuance of the SACE guarantee.

Under the facility’s innovative mechanism – which provides a potential model for assistance to other business sectors in Italy – all disbursements from the credit facility will be managed through dedicated accounts opened with Intesa Sanpaolo for the purpose of providing liquidity to FCA’s business in Italy and to its Italian suppliers, thereby supporting the restart of industrial production in Italy and the continuation of key investment projects at the Group’s Italian plants and suppliers.

The Italian automotive ecosystem is one of the country's globally recognized areas of strength, as well as being one of the largest areas of specialized industrial and commercial know-how in Europe. The sector is the largest investor in research and innovation in the country and, as such, fundamental to Italy’s future economic competitiveness in an era characterized by rapid technological change. The automotive sector accounts for approximately 6.2% of Italian GDP and some 7% of all manufacturing sector employment.

FCA Italy and the Italian companies of the FCA Group have confirmed their commitment to implement their extensive investment plan for Italy, most of which has already been initiated in plants nationwide, that is at the heart of the Italian automotive sector’s transformation towards a low emission, hybrid/electric-powered and connected future.

As part of that plan, FCA Italy recently started production of the all-new Fiat 500 electric in Turin and the Jeep Renegade and Jeep Compass plug-in hybrids in Melfi, and development has been completed and production is due to start for the all-new Maserati MC20 super sport car at the historic Modena plant.

Going forward, the Pomigliano plant will be prepared for production of the all-new Alfa Romeo C-UV, the Turin manufacturing hub for production of the all-new Maserati GranTurismo, GranCabrio (available also with electric propulsion), the Maserati Ghibli and Levante (including Hybrid versions), and the Cassino plant for production of the all-new Maserati D-UV.

In addition, new initiatives include development of the new GSE/MHEV (Mild Hybrid) engine module at Termoli, which will equip the Jeep Renegade, Jeep Compass and Fiat 500X produced at Melfi.

In Piedmont, significant investments have been initiated at the former Rivalta plant - for the construction of the Mopar brand's new parts distribution center - and at the Mirafiori complex, where FCA is to install Solar Power Production Units consisting of photovoltaic panels, a battery assembly center (Battery Hub) and has started the Vehicle-to-Grid pilot project, confirming its leading role in electrification at European level.

The principal production launches will be phased over 2020 and 2021, with all launches completed by 2022. This ambitious plan covers the product offering for all brands and manufacturing sites in Italy, including significant upgrades for powertrains.

The new credit facility forms part of FCA’s broader plan to support the safe restart of its Italian operations. This follows an unprecedented period in which rapid measures were taken to protect employees, families and communities during the Covid-19 emergency, and which resulted in a complete suspension of FCA’s industrial and commercial activities in Italy, with the inevitable impact on the entire automotive ecosystem in Italy.

Commenting on the agreement, Pietro Gorlier, FCA’s Chief Operating Officer for the EMEA region said: “Faced with an unprecedented crisis, this is an example of Italy coming together to safeguard a vital industrial ecosystem. The combined strengths of government, our nation’s largest bank and Fiat Chrysler Automobiles have been put to work to ensure the Italian automotive system as a whole can continue to play its role in the restart of Italy’s economy. 100% of the money this facility provides will be directed to our Italian business and so to the thousands of companies and hundreds of thousands of workers who depend on the successful relaunch of our entire sector as we continue a transformative shift to a new electric and hybrid powered future.”

FCA enters into €6.3 billion credit facility with Intesa Sanpaolo, supporting the restart and transformation of Italy’s automotive sector
 

Deckard Cain

Active member
At least this actually confirms plenty of the products that are coming down the line in Europe.
The investment in Maserati is impressive.
 

AlexB

Well-known member
@AlexB

It adds no complications to PSA-FCA deal. FCA took it because this is cheap money and actually Italy was the one which made this available for all Italian companies. It would be silly not to take this relatively cheap credit line.
Well, the "ringfencing/Money Wall" in Italy is a complexity when the effort is to integrate PSA and what's left of Opel overhead-product development into the Italian side.
 
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Bili

Official Pilot
Staff member
@AlexB

I don't see it as complexity when it's pretty much clear that Opel R&D will be killed together with Vauxhall manufacturing footprint in the UK.

So far FCA has confirmed investment in Italy even with current unprecedented situation due to COVID19.
CO2 compliance projects must go on.
 

Deckard Cain

Active member
Yeah, Opel R&D and factories will be the sacrificial lamb. The UK is out of the EU, and France and Italy will provide incentiives to keep the french and italian brands centers of competence.
 

pumadog

Active member
I think they'll keep some sort of R&D in Rüsselsheim. That's pretty important for Opel's image. But yes, the death of the UK plants is obvious.
 

Bili

Official Pilot
Staff member
I think they'll keep some sort of R&D in Rüsselsheim. That's pretty important for Opel's image. But yes, the death of the UK plants is obvious.
Maybe but IMO it would be minimal and without any what I would call base development. Like an all new engines or platforms.
 
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