ROME -- Fiat Chrysler Automobiles will need to file regular reports on its use of a multi-billion euro state-backed loan and could face sanctions if it does not respect commitments attached to the package, Italy’s economic minister said Thursday.
With demand slashed and factories idled by coronavirus restrictions, FCA has sought emergency state guarantees on a 6.3 billion-euro ($7.15 billion) loan for its Italian unit. The loan, which will be funded by Intesa Sanpaolo, is expected to be approved soon.
A government official with knowledge of the matter told Reuters on Thursday that the Italian Treasury would clear state guarantees covering 80 percent of the loan "in the next few days." The guarantee will be provided through Italy’s export credit agency SACE.
The loan would be Europe's biggest government-backed financing to an automaker since the start of the coronavirus pandemic. Renault Group has secured a 5 billion-euro credit facility backed by the French Government, but it comes with few conditions.
The loan has drawn criticism in Italy because FCA is working to merge with France-based PSA Group after moving its legal headquarters to the Netherlands in recent years.
FCA burned through $5.5 billion in the first quarter, and the company and PSA Group last month scrapped a plan to pay out 1.1 billion euros in dividends as part of their 2019 merger agreement.
Economy Minister Roberto Gualtieri told a parliamentary committee that the approval would hinge on a set of conditions such as paying suppliers that are crucial for Italian plants or financing domestic investments, in particular for electric vehicles.
"There must be a significant impact in terms of employment, investments and innovation," Gualtieri said.
He said that once approved the loan would require FCA to regularly report on how the money is being used, adding any penalties could include even repaying the loan in full ahead of maturity.
It is unclear whether Italy will also set conditions on FCA's planned 5.5 billion euro extraordinary dividend as part of its merger agreement with PSA.
Italian politicians have called the dividend into question, although the payout might not be incompatible with state aid because it is not due until 2021 and would be made by Fiat Chrysler Automobiles NV, FCA Italy’s parent company that is based in the Netherlands.