By Eric Sylvers and Ben Dummett

Fiat Chrysler Automobiles NV and PSA Group changed the terms of their merger to preserve cash as the two car makers shore up their financial positions following the negative effects of the coronavirus pandemic.

Fiat Chrysler will now pay a dividend of EUR2.9 billion to its shareholders ahead of the closing of the merger, down from the previously agreed EUR5.5 billion, the companies said in a joint statement Monday.

PSA, which owns the Peugeot and Citroën brands, agreed to scrap an agreement to spin off its 46% stake in auto parts maker Faurecia SE ahead of the closing. Instead, the stake of publicly traded Faurecia, which is worth about EUR2.7 billion, will be spun off following the closing.

The companies said they are still on track to complete the deal by the end of March.

The cut to the cash portion of the dividend comes after Fiat Chrysler, like most of its peers, reported a second-quarter loss as coronavirus lockdowns halted production and led to a drop in sales. While Fiat Chrysler has abundant liquidity, in the second quarter it burned much more cash than it had coming in.

Write to Eric Sylvers at eric.sylvers@wsj.com and Ben Dummett at ben.dummett@wsj.com