Fiat Chrysler nears $6.9B state-backed loan, report says

MILAN — Fiat Chrysler Automobiles is close to securing a 6.3 billion-euro ($6.9 billion) credit facility as Italy’s biggest retail bank, Intesa Sanpaolo, is expected to give conditional approval at a board meeting on Tuesday to a state-guaranteed loan, according to people familiar with the matter.

The loan would be Europe’s biggest government-backed financing to an automaker since the start of the coronavirus pandemic.

Top executives from Fiat Chrysler and Intesa discussed terms over the last few days and have reached an agreement, said the people, who asked not to be named because deliberations are not public.

While Intesa’s approval is a crucial step, the financing needs a sign-off from trade-credit insurer Sace and by the Italian government.

Spokesmen for both Fiat Chrysler and Intesa declined to comment.

Italian unit
The state-guaranteed loan is designed to bolster the domestic auto industry by directly channeling resources to FCA’s suppliers. The credit facility under discussion would be for FCA’s Italian unit, which last year lost about $1 billion before taxes.

Car sales in Italy plunged 98 percent in April and FCA’s plants were mostly shuttered during the nationwide lockdown in March and April.

In the envisaged deal, Italy’s top lender would lead a three-year loan facility to help finance the manufacturer’s business in the country, FCA said in a statement earlier this month.

Sace would guarantee 80 percent of the amount through a mechanism that would need final approval by the finance ministry.

Automakers have been among the hardest-hit industries during the COVID-19 crisis, with factory shutdowns and cratering sales in markets from China and Europe to the U.S.

FCA burned through $5.5 billion in the first quarter, and the company and French peer PSA Group earlier this month scrapped a plan to pay out 1.1 billion euros in dividends as part of their 2019 merger agreement.

The new financing plan would “provide further support to some 10,000 small and medium enterprises in the automotive supply chain in Italy,” FCA said in its May 16 statement.

Aston Martin’s Palmer said to step down as CEO

LONDON — Aston Martin CEO Andy Palmer is leaving the automaker as part of a management shake-up, the Financial Times reported, citing people with knowledge of the move.

The company will name Tobias Moers, CEO of Mercedes-AMG, as Palmer’s replacement on Tuesday, the paper reported on Sunday.

Daimler owns a 5 percent stake in Aston Martin and supplies the automaker with Mercedes-AMG engines.

Palmer joined Aston Martin in 2014 after working for Nissan for 25 years, rising to become chief planning officer and a key lieutenant of former Nissan Chairman Carlos Ghosn.

Aston Martin’s shares have fallen by more than 90 percent since its initial public offering in 2018 as the company was hit by oversupply to its dealerships, and a global slowdown among luxury buyers.

The automaker booked a 120 million-pound loss ($146 million) in the first three months, in part because factories and dealerships were forced to closed due to coronavirus.

In January, Canadian billionaire Lawrence Stroll bought a 20 percent stake in Aston Martin for nearly 200 million pounds ($263 million), as the company sought to raise funds.

Aston Martin said in a statement that it is reviewing its management team and will make an announcement when appropriate.

Reuters and Bloomberg contributed to this report

Hertz files for bankruptcy in U.S. after rental-car demand vanishes

Hertz Global Holdings filed for bankruptcy in Delaware after sweeping travel restrictions and the global economic collapse destroyed demand for its rental cars.

The Chapter 11 filing allows Hertz to keep operating while it devises a plan to pay its creditors and turn around the business. The action includes the company’s U.S. and Canadian subsidiaries, but doesn’t cover Europe, Australia and New Zealand, according to a statement on Friday.

Hertz said it had $1 billion in cash to support its operations, which include Hertz, Dollar, Thrifty, Firefly, Hertz Car Sales, and Donlen. But it might need to raise more, perhaps through added borrowings while the bankruptcy process moves forward, Hertz said.

The court petition listed about $25.8 billion in assets and $24.4 billion of debts. Its biggest creditors include IBM Corp. and Lyft Inc., according to the document.

Hertz has traditionally been a leading buyer of fleet cars from the Detroit 3 and other automakers. Last year, Hertz held as many as 567,600 vehicles in its U.S. fleet and 204,000 in its international unit, holding those in the U.S. for an average of 18 months and international vehicles for 12 months, according to a U.S. filing.

Its biggest suppliers of fleet vehicles were General Motors (21 percent), Fiat Chrysler (18 percent), Ford (12 percent), Kia (10 percent), Toyota (9 percent), Nissan (7 percent) and Hyundai (5 percent), according to the filing.

The second-largest U.S car-rental company began laying off workers to preserve cash in March as emergency measures to contain the coronavirus halted business and leisure travel. Hertz disclosed on April 29 that it had missed substantial lease payments related to its rental cars. It named a new CEO in May — its fifth since 2014.

Creditor talks

The Estero, Fla.-based company had been negotiating with lenders for relief as well as with the U.S. Treasury Department about the possibility of a bailout. But with dismal demand, an oversize fleet and plunging prices for used cars, Hertz didn’t have enough liquidity to last until a market recovery.

“Uncertainty remains as to when revenue will return and when the used-car market will fully re-open for sales, which necessitated today’s action,” Hertz said.

While all travel-related companies have been hurt by the pandemic, a big part of what’s weighed on Hertz is its strategy of owning or leasing a large portion of its fleet outright instead of acquiring them through buyback agreements with manufacturers. Hertz typically responds to falling demand by selling cars from its fleet, so it has been hit especially hard by a drop in prices at used car auctions.

White & Case is the company’s legal adviser, Moelis & Co. is the investment banker, and FTI Consulting is providing financial advice. Carl Icahn holds a 38.89 percent equity stake, Hertz said.

Hertz, originally known as Rent-a-Car, was founded in Chicago in 1918. It was operating 12,400 locations worldwide as of February, according to a regulatory filing.

Startup remakes Henry Ford’s production line for modern era

A German startup run by a former Audi engineer has received backing for his planned makeover of the assembly-line approach to carmaking introduced by Henry Ford a century ago.

The company, Arculus, wants automakers to abandon rigid production lines and adopt its more flexible platform in which self-driving robots move half-built cars to different sections.

London-based venture capital firm Atomico is among the investors who put in a total of 16 million euros ($17.3 million) to the company.

“Now that we have this funding, it’s going to be about broadening the customer base,” Arculus CEO Fabian Rusitschka, who has set up shop in Ingolstadt, close to BMW, said.

Having raised the interest of Audi and other automakers, the next step is scaling up to take on major manufacturing projects. While the coronavirus pandemic has decimated the car industry, the need for social distancing at work could play in Arculus’ favor, Rusitschka, 36, said. There’s limited space on a traditional assembly line, with fixed machinery packed close together.

“You can’t move the workplaces apart from each other, you can barely create any distance,” Rusitschka said.

Arculus’ system works by moving components on flat self-driving robots, allowing for a two-dimensional production grid where steps can be skipped, or stations moved if need be. If the traditional production line is a conveyor belt, Arculus’s system is more like a shopping mall, where every step in the process is a store that can be visited at will, he said.

The move to electric vehicles could also be a boost. With the technology still evolving, automakers will want to keep their options open. That does not suit the traditional car-making set up. “With that long-lasting system, you basically need to decide now what you’re going to have for the next 10 years,” he said.

Currently, Audi is using the platform for some aspects of pre-production, but Rusitschka said he believes long-term the benefits of modular production will outweigh the costs. Automakers will have to be nimbler and innovate to keep up with EV developments.

“Nobody knows what the future is going to look like,” Rusitschka said. “One of the biggest strengths of the modular production system is you can adapt.”

Automakers, suppliers raise $155B to weather coronavirus crisis

LONDON — Automotive industry borrowers have raised $155 billion amid the coronavirus outbreak as the pandemic shutters showrooms and factories.

Companies worldwide have been drawing down on existing credit lines and seeking new credit deals to weather the health crisis, which has hit demand for vehicles.

The $155 billion gathered since mid-March, when global cities went into lockdown, is equivalent to the total issuance in the eight-month period before that.

The $44 billion in bonds sold in the period is greater than the industry’s issuance in any single quarter.

The $111 billion in loans raised in the period could match the sales of $133 billion in all of 2019, once about $18 billion of pending deals get completed.

General Motors, the industry’s biggest borrower, raised $21.6 billion of loans and sold $5.5 billion of bonds. GM, which had drawn down on a $16 billion revolving facility in March, subsequently added two more new loans. GM tapped capital markets again this month.

Automakers including Ferrari and Toyota followed suit as some industry output resumed and countries began to lift restrictions on travel.

At the same time, automakers are seeking to preserve cash, in part by suspending dividends and keeping a tighter eye on nonessential spending and capital expenses. A number of top executives have taken voluntary pay cuts.

Former Opel CEO Neumann says Israel has become a hotbed for mobility tech

In Germany, Karl-Thomas Neumann sees a country rooting its next-generation mobility culture around traditional cars. In Israel, he sees one formulating future plans around a variety of transportation modes.

The longtime automotive executive lamented Germany’s lack of vision and praised Israel’s efforts during remarks at the virtual EcoMotion mobility tech conference.

EcoMotion is a joint venture of the Israeli Innovation Institute, the Smart Transportation Administration and the Ministry of Economy.

“In Germany, we believe mobility is cars, and we think we have to protect the auto industry and the notion that you own your own car,” he said. “There’s no city in Germany with a strong vision of getting rid of cars and creating the next level of mobility and transportation.”

Neumann, former CEO at Continental, Opel and Volkswagen China, has been paying close attention to the startup ecosystem and mobility technology emerging from Tel Aviv. He believes Israel has emerged as a global hotspot for transportation technology, thanks to the country’s combination of an educated work force, entrepreneurial culture and access to funding.

Tel Aviv is “creating a test bed and a place where you can demonstrate these technologies, and becoming a model for other cities in the world,” he said. “That enables startups to do things here they cannot do in other places. … That’s really important for setting a good base for automotive and mobility startups.”

Last year, Neumann joined the board of directors at one of those startups — Cartica AI. The company has developed an unsupervised learning approach to artificial intelligence that could improve the accuracy of image classification in driver-assist and autonomous-driving systems. He sees his value in helping Cartica, and potentially other startups, through the years-long process to series production in the automotive sector.

Neumann heard about Israel’s burgeoning technology culture during his tenure as Opel’s CEO from 2013 to 2017. It wasn’t until after he left the job and a friend cajoled him into visiting Tel Aviv that he saw Israel’s potential in the automotive sector firsthand.

“I was totally impressed,” he said. “I’d go to a startup event in Berlin, and say, ‘This is really cool, and I could see it being used to deliver food to someone.’ But in Israel, it’s like every company, after a half hour of talking to them, I couldn’t understand what they were talking about because they were so deep in the technology.”