Workers who sit at home see their income reduced as their (temporary) unemployment benefits are lower than their salaries, sometimes significantly. At the same time, their monthly bills for rent and energy as well as their repayments of loans and mortgages remain unchanged.
Without new revenues, many vehicle manufacturers and supply will face significant liquidity problems in the short to medium term. Available levels of cash vary across the sector, but several companies could face shortages within a matter of months.
The automotive sector is highly capital intensive. Companies rely on frequent refinancing to fund their operations. In the current situation, it will be difficult for companies to obtain new financing from commercial banks and/or investors.
Measures at EU level
At EU level, the European Central Bank (ECB), the European Investment Bank (EIB) and the European Commission (EC) have already taken various measures to support affected workers and companies.
European Central Bank
The ECB essentially aims to maintain liquidity in the financial system by purchasing bonds issued by Member States and commercial companies and by relaxing various requirements imposed on commercial banks.
Pandemic Emergency Purchase Programme
The ECB adopted a Pandemic Emergency Purchase Programme on 19 March.
This enables the ECB to purchase sovereign bonds from all EU Member States under flexible conditions as well as commercial papers of sufficient credit quality. The programme has an envelope of €750 billion and runs until the end of the year. The ECB has declared its willingness to increase the size of its asset purchases and adjust their composition, by as much as necessary and for as long as needed.
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SOURCE: ACEA