With their sales decimated by the coronavirus outbreak, Fiat Chrysler Automobiles and PSA Group have postponed their shareholder meetings and are looking at ways to boost cash reserves ahead of their planned merger.
The two automakers have turned to their banks to secure much-needed cash, and FCA is considering debt guarantees that the Italian government approved on Monday to support local companies, a source with knowledge of the matter told Reuters.
FCA, whose legal headquarters is in the Netherlands but operates factories in Italy, could qualify for the government program, which offers more than 400 billion euros ($433 million) worth of liquidity and bank loans to companies hit by the pandemic, the source said, adding that no decision had been made.
A spokesman for FCA declined to comment.
In December, PSA and FCA signed a memorandum of understanding that would create the world's fourth-largest carmaker, with shareholders of each group holding 50 percent in the new entity.
The crisis set off by the virus has virtually erased demand for new vehicles and disrupted supply chains, pushing automakers to temporarily halt most production.
In late March, FCA secured a credit line worth 3.5 billion euros ($3.8 billion), with an initial 12-month term that can be extended by six months. This added to existing credit facilities worth 7.7 billion euros ($8.4 billion).
However, FCA would need to cut its ordinary dividend if it decides to pursue state aid from Italy. The emergency decree says companies looking to apply for Italy-backed loans must refrain from approving dividend payments for a year.
FCA's decision to postpone the shareholders' meeting to late June has analysts speculating that its ordinary dividend worth 1.1 billion euros ($1.2 billion) could be canceled or postponed.
"While the merger process is proceeding, the postponement of the AGM will raise markets' concerns of a potential cancellation of the ordinary dividend," said Monica Bosio, an analyst at Intesa Sanpaolo.
Martino De Ambroggi, an analyst at Equida, said that the most likely outcome is that both FCA and PSA cancel or postpone their ordinary dividends.
PSA, which proposed a similar 1.1 billion euro dividend, also decided to postpone its annual shareholders' meeting, to June 25. But the automaker is not expected to tap state funding, a source close to the company said.
The French automaker, which is led by CEO Carlos Tavares, said on Monday that it had agreed to new credit lines worth about 3 billion euros ($3.6 billion). It is sitting on undrawn credit facilities worth about 3 billion euros.