Peugeot maker PSA and Fiat Chrysler Automobiles (FCA) have restructured the terms of their planned merger to conserve cash reserves, and also stepped up the promised levels of cost cutting during the pandemic. Two companies, which are set to merge into Stellantis, the world’s fourth-largest carmaker, said in a joint statement late on Monday that FCA would cut to 2.9 billion euros ($3.4 billion) the cash portion of a 5.5 billion euro special dividend its shareholders will receive under the terms of the accord they signed last year.

France’s PSA, whose brand portfolio also includes Citroen and Opel, will in turn postpone the planned spinoff of its 46% stake in parts maker Faurecia until after the merger’s closing and extend it to all shareholders of the new group.

Faurecia’s market capitalisation is around 5.9 billion euros.

“Amendments preserve the balance of original combination agreement,” the two groups said, adding that ownership of Stellantis would still be split 50/50 between current PSA and FCA shareholders.

A source said on Monday that the aim of those changes was to reinforce the balance sheet structure of both companies after the COVID-19 crisis and ensure that the merger plan is concluded as soon as possible. Analysts had argued that such a large cash payout to FCA shareholders, led by controlling investor EXOR, the holding company of Italy’s Agnelli family, could weaken the new carmaker’s finances, as the auto industry is paying a high price for the coronavirus outbreak.

Confirming last week that the deal was on track, FCA Chief Executive Mike Manley said both he and PSA CEO Carlos Tavares were aware of the need for the two firms to get to the merger with the strongest balance sheets possible as well as for shareholders to get what they expected.

FCA and PSA said annual estimated synergies from their merger were now seen at more than 5 billion euros, compared with an initial estimate of over 3.7 billion.

The two carmakers confirmed that they expect to complete the tie-up process by the end of the first quarter of 2021.

Both earlier this year scrapped dividend payments on 2019 results, each worth 1.1 billion euros.

Shares in Fiat Chrysler rose sharply in Milan on Tuesday after the car maker and French partner PSA revised the terms of their merger deal, with FCA’s shareholders getting a smaller cash payout but a stake in another business.

Meanwhile, Daimler will pay $2.2 billion to resolve a US government diesel emissions cheating investigation and claims from 250,000 US vehicle owners, court documents show.

The German automaker and its Mercedes-Benz USA LLC unit disclosed on August 13 it had reached a settlement in principle resolving civil and environmental claims tied to 250,000 US diesel cars and vans after the automaker used software to evade emissions rules.

Daimler said in August expected costs of settlements with US authorities would total $1.5 billion, settling with owners will cost another $700 million and also disclosed “further expenses of a mid three-digit-million EUR (euro) amount to fulfill requirements of the settlements.

Deputy Attorney General Jeff Rosen said the settlements, which follow a nearly five-year investigation, will “serve to deter any others who may be tempted to violate our nation?s pollution laws in the future.”

In court documents, Daimler agreed to pay 250,000 owners up to $3,290 each to get polluting vehicles repaired and agreed not to oppose paying $83.4 million in attorneys fees and expenses for the owners’ lawyers. Owners will get $800 less if a prior owner files a valid claim.

Daimler noted in court papers it denies the allegations “and does not admit any liability. The settlement does not include an external compliance monitor, it added. The German automaker still faces an ongoing criminal back investigation and could face additional US financial penalties.

The settlements require Daimler to address the vehicles’ excess emissions as part of binding consent decrees. Daimler will issue recalls and extended warranties but is not required to buy back vehicles unless it is unable to offer an emissions fix within a required timetable.

The Justice Department said Daimler failed to disclose at least 16 auxiliary emissions control devices, the government alleged, allowing “vehicles to perform in a variety of consumer-desirable ways, including allowing for fewer (diesel exhaust fluid) tank refills (and) better fuel mileage.”

The settlement includes an $875 million civil penalty levied under the Clean Air Act and $546 million to fix the polluting vehicles and offset excess emissions, court papers show. Daimler will pay California $285.6 million in total.

Reuters