Because of a cap on dividends and its debt covenants, Fiat’s access to Chrysler’s money is hindered and to address some of its financial problems has asked the Bank of Italy to be allowed to transform Fga Capital into a bank.
The intention to turn the financing unit into a bank would allow the struggling carmaker to further cut costs and is at the moment only reported by internal sources, with no official confirmation. Other carmaker already have their own internal banks, which allowed them to gain access to cheap loans from the European Central Bank (ECB) during the euro zone crisis.
Analysts are now growing concerned on Fiat’s debt – the $4.35 billion deal to take full control of Chrysler was actually funded from the US unit’s own cash – and the automaker’s ability to shift its focus to more upmarket models like Maserati’s brand and the failing Alfa Romeo.
“On the basis of the group’s available liquidity, credit lines in place and available for investment in industrial activities, in addition to the ability to access capital markets … the group believes its capital resources are more than adequate to meet the projected funding requirements,” Fiat said in a statement, regarding a clarification request from Consob, a market regulator.
According to Fiat, Chrysler’s liquidity totaled $14.7 billion at the end of 2013 and beyond the dividend cap, the payments would also be subjected to the condition of Chrysler’s liquidities exceeding a total of $3 billion.