Three major Italian banks have announced Wednesday they will come to the rescue of the indebted car-maker, Fiat. The decision follows reports of huge losses by Fiat and the group of companies affiliated with it.
The Italian creditor banks of Fiat have agreed to support immediately the ailing group's plan to cut its debt by loaning it three billion euros - almost $2.8 billion. But the three banks, Banca di Roma, IntesaBCI and Sanpaolo IMI, said Fiat would have to give the banks shares if it failed to meet its debt-cutting targets.
Fiat has pledged to halve its net debt this year. The group posted a first quarter loss of 529 million euros, about $492 million.
International ratings agencies declared they might downgrade the credit of the Fiat group, once Europe's most important auto-maker.
The deal to help Fiat came amid growing speculation that the auto-maker may be forced to sell its majority stake in its core car division. The company has been hit by falling car sales. In Italy, its key market, car sales fell 18 percent in March and 13 percent in April.
The Fiat group is Italy's largest private-sector industrial employer. Earlier this month, it announced plans to cut 2,800 jobs in Fiat's Italian factories. Concern about the impact that will have on the Italian economy has spread to the government, and ministers are discussing the situation.
General Motors owns 20 percent of Fiat Auto, and the Italian industrial group Fiat owns 80 percent. Fiat has an option to sell its majority stake in Fiat Auto to General Motors starting in 2004.
Analysts say Fiat might be best advised to exercise that option, but that idea is strongly opposed by Fiat's powerful honorary chairman, Gianni Agnelli, whose grandfather founded the company at the end of last century.