European carmakers are facing up to a liquidity shortage this year that is being caused by  lower sales revenues and little prospect of recovery in the near term.

Daimler AG will ask its shareholders to approve a proposal facilitating a capital increase.

The Financial Times Deutschland newspaper reported that if stockholders grant their approval, it will be easier for the supervisory and executive boards of Daimler to issue new shares worth up to EUR1bn.

In view of the current uncertainties, Daimler must improve the flexibility of its financing, a spokesperson for the company told FTD.

Analysts say that European carmakers are facing a cash shortage this year as sales volumes shrink.

Meanwhile, PSA Peugeot-Citroen is reportedly negotiating a syndicated credit line worth around EUR1-1.2bn.

“Our strategy is not to increase our drawn debt but to keep this facility available,” a company spokesman told Reuters.

The company has two existing undrawn syndicated credit lines amounting to EUR2.4bn and the new loan will total a similar amount to one of those facilities, the spokesman added.

In February, the French government pledged to lend PSA EUR3bn in return for safeguarding French jobs.

The company will receive the state loan at the end of March, Reuters reported.

A PSA spokesman also told Reuters that state backing would aid the company in its negotiations with the banks, and the new loan was expected to be agreed in the next few weeks.