(Bloomberg) -- Fiat Chrysler Automobiles NV and French car-making peer PSA Group decided to scrap the 1.1 billion-euro ($1.2 billion) dividends that each agreed to pay as part of their merger agreement, citing the negative impact of the coronavirus pandemic.
Fiat Chrysler and PSA had vowed to each distribute the payouts this year as part of their December agreement to create the world’s fourth-biggest carmaker. The two also said at the time that as part of the deal, Fiat Chrysler would distribute a 5.5 billion euro special dividend, yet no mention of that payment was made in a joint statement Wednesday.
Preparations for the merger are still “advancing well,” and the deal is on track to close before the end of next year’s first quarter, the boards of both manufacturers said.
The Italian-American automaker is seeking to conserve cash after burning through $5.5 billion in the first quarter while its North American plants were shuttered and new-car demand stalled. PSA laid the groundwork for a possible revision of the payment last month after revealing a 16% plunge in first-quarter sales.
What Bloomberg Intelligence Says:
PSA Peugeot has canceled its 1.1 billion-euro dividend and is rightly focused on conserving cash, given its EU plants are only slowly reopening after nine weeks of shutdown, and net liquidity had fallen by 4 billion euros in 1Q. Fiat jointly scrapped its dividend as these two merger hopefuls support their credit ratings and await regulatory approval for the deal. Doubt now remains over Fiat’s planned 5.5 billion pre-merger special dividend.
-- Michael Dean, BI automotive analyst
Shares of both carmakers extended their steady declines so far this week, with Fiat Chrysler 1.4% lower and PSA down 3.8%.
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