Renault is on the verge of securing a multibillion-euro line of credit from the French state as it burns cash at a rate of 600 million euros per month with worldwide sales plummeting in due to the coronavirus.

The automaker hopes to put in place the deal, which will involve a state-guaranteed loan granted through banks and is expected to reach around € 4 billion to € 5 billion, in the coming weeks. The State is Renault’s largest shareholder, with just over 15% of the capital.

“We have no visibility on the duration of the crisis, no one has, while there is a possibility of seeking credit facilities with the approval of the French State. . . we are going to make sure it is on the right side, ”said Renault interim CEO Clotilde Delbos. She expects the deal to be in place by the second half of May.

The French government has put 300 billion euros in state-guaranteed loans on the table, with other major groups such as airline Air France-KLM also in talks to secure multi-billion euro packages. French distributor Fnac Darty confirmed last week that it had secured a € 500 million loan agreement. So far, 38.3 billion euros in loans have been granted to 268,518 companies.

Renault spent more than 5 billion euros in cash in the first quarter of the year. It held € 10.3bn in liquidity reserves at the end of March, compared to € 15.8bn at the end of 2019.

Ms Delbos attributed most of that reduction in cash to an expected seasonal increase in working capital, but said the group was burning 600 million euros per month, excluding working capital.

“We have enough liquidity to cover this consumption of cash,” she added, saying the state-guaranteed loans and other lines of credit being traded in emerging markets were a “safety net. “for a” dark scenario “.

Costs are under control because all of the group’s production workers in Europe are on short-time work while 85% of their non-factory employees are part-time, including 16,000 in the Paris region. Renault has also cut its marketing budget in half.

Ms Delbos said Renault still saw a trickle of sales globally, in countries like Russia and Turkey, while first-quarter sales plunged 19.2% to € 10.2 billion. Renault’s global sales fell 25.9%. In Europe, they slipped 36%.

The group canceled its dividend and suspended its financial forecast, saying it remained “impossible to assess” what the impact would be this year.

French rival PSA, which reported a 16% drop in sales in the first quarter, said it expected the auto market to fall this year by 25% in Europe, 10% in China, 25% in Latin America and 20% in Russia.

Germany’s Daimler said on Thursday he expected pre-tax profits for the first three months of the year to decline by nearly 80%, as he warned that the full effects of the coronavirus could not be evaluated.

Mercedes-Benz owner’s profit before interest and taxes fell to 617 million euros, from 2.8 billion euros in the same period last year. This month, Daimler secured a € 12 billion line of credit from four major banks, in addition to an existing € 11 billion facility.

Renault, along with other automakers such as Volkswagen and Toyota, are starting to reopen some of their European facilities, while trying to socially outrun staff and run lines at slower speeds.

The group said it plans to reopen French assembly plants this week to around 25% of normal capacity, rising to 50% as soon as possible and more as demand improves. It aims to make the factories making its electric and hybrid cars work first.

Renault, which awaits the arrival of new CEO Luca de Meo this summer, is expected to present a savings plan of 2 billion euros and its strategy to strengthen its global alliance with Nissan and Mitsubishi by the second half of May. . Ms Delbos said the plan would not be affected by the acceptance of government guaranteed loans.

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