PARIS (1) – Renault (RENA.PA) is in talks with the French authorities to safe a state-backed loan price a number of billion euros by mid-Could to shore up its liquidity throughout the coronavirus pandemic, the French carmaker mentioned on Thursday.

FILE PHOTO: The emblem of Renault carmaker is pictured at a dealership in Orvault, close to Nantes, France, February 19, 2020. REUTERS/Stephane Mahe/File Picture

Interim Chief Govt Clotilde Delbos mentioned Renault, which is 15% owned by the French state, was lining up credit score strains and support when doable, together with in France and rising markets.

“It’s our obligation to be on the secure facet and to cowl even black, black, black eventualities,” Delbos mentioned on a name with analysts, including that it was unclear how lengthy the crisis would final and what impression it will have on earnings this yr.

She mentioned, nonetheless, that Renault had sufficient liquidity to make it by the coronavirus turmoil, together with masking a month-to-month money burn of 600 million euros ($647 million) linked to the closure of its crops and dealerships throughout the well being crisis.

The corporate had 10.Three billion euros of liquidity reserves on the finish of March – together with an unused 3.5 billion euro credit score line – although that was nonetheless 5.5 billion euros decrease than the top of 2019. The primary quarter is historically a interval when carmakers use money to spice up automobile shares.

Renault shares had been up 1.9% at 0903 GMT.

Gross sales of Renault automobiles have been hit laborious by the pandemic as governments implement lockdowns all over the world. Rivals have reported slumps in gross sales and a few, such as Ford Motor Co. (F.N) have additionally been beefing up their money reserves.

However the French carmaker was already combating faltering demand earlier than the crisis, attracting scrutiny over its money ranges and monetary place after posting its first loss in a decade in 2019.

“Liquidity stays excessive in mild of value discount however leverage considerations unresolved,” analysts at Jefferies mentioned.

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Renault’s Japanese alliance associate Nissan (7201.T) posted its first quarterly loss in almost a decade in February and the 2 are because of current plans to reboot their partnership in Could, together with industrial tasks.

Delbos mentioned in February that Renault was embarking on a “no taboo” plan to chop 2 billion euros of prices which may embrace job reductions as it reviewed efficiency at factories.

She mentioned on Thursday there have been no strings connected to the state-backed loan that will have implications for the plans, bar cancelling dividend payouts, which it has already executed.

Few main French corporations have but tapped this type of state support, barring client electronics retailer Fnac Darty (FNAC.PA). Air France KLM (AIRF.PA) can be transferring in direction of a government-backed rescue deal.

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Renault, which has suspended its outlook for 2020, posted a 19.2% drop in first-quarter income to 10.13 billion euros. It mentioned it will look to renew manufacturing in Europe the place doable and was slicing prices in areas such as promoting.

Renault offered extra automobiles in Russia than in its residence market within the first quarter as demand slumped in Europe, the primary time France has fallen from the highest spot.

The carmaker benefited barely from promoting costlier SUV-style fashions such as the Renault Captur however this was not ample to offset tumbling gross sales volumes.

Reporting by Gilles Guillaume and Sarah White; Modifying by Himani Sarkar, Sherry Jacob-Phillips and David Clarke