PARIS -- Renault is in talks with the French government to secure a state-backed loan worth several billion euros by mid-May to shore up its liquidity during the coronavirus pandemic.
Interim CEO Clotilde Delbos said Renault, which is 15 percent owned by the French state, is lining up credit lines and aid when possible, including in France and emerging markets.
"It is our duty to be on the safe side and to cover even black, black, black scenarios," Delbos said Thursday on a call with analysts, adding that it was unclear how long the crisis would last and what impact it would have on earnings this year.
She said there were no strings attached to the state-backed loan, except canceling dividend payouts, which the automaker has already done.
Delbos said Renault had enough liquidity to make it through the coronavirus turmoil, including covering a monthly cash burn of 600 million euros ($647 million) linked to the closure of its plants and dealerships during the health crisis.
The company had 10.3 billion euros of liquidity reserves at the end of March, including an unused 3.5 billion euro credit line, though that was still 5.5 billion euros lower than the end of 2019. The first quarter is traditionally a period when carmakers use cash to boost vehicle stocks.
Sales of Renault vehicles have been hit hard by the pandemic as governments enforce lockdowns around the world. Rivals have reported slumps in sales and some, such as Ford have also been beefing up their cash reserves.
Renault was already struggling with faltering demand before the crisis, attracting scrutiny over its cash levels and financial position after posting its first loss in a decade in 2019.
"Liquidity remains high in light of cost reduction but leverage concerns unresolved," analysts at Jefferies said.
Renault's Japanese alliance partner Nissan posted its first quarterly loss in nearly a decade in February and the two are due to present plans to reboot their partnership in May, including industrial projects.
Delbos said in February that Renault was embarking on a "no taboo" plan to cut 2 billion euros of costs which could include job reductions as it reviewed performance at factories.
Renault, which has suspended its outlook for 2020, posted a 19 percent drop in first-quarter revenue to 10.13 billion euros. It said it would look to resume production in Europe where possible and was cutting costs in areas such as advertising.
Renault’s new CEO, Luca de Meo, will take the helm in July. He was previously head of Volkswagen Group's Seat brand. Delbos will continue in her role as chief financial officer.
The coronavirus pandemic is hammering automakers' cash reserves. Volkswagen Group CEO Herbert Diess said in March that the automaker is burning through about 2 billion euros ($2.2 billion) a week.
