Fiat Chrysler And Peugeot Agree On Merger To Create 4th-Largest Carmaker

Enlarge this image toggle caption Balint Porneczi/Bloomberg via Getty Images Balint Porneczi/Bloomberg via Getty Images

Fiat Chrysler and Groupe PSA, the owner of Peugeot, agreed on Thursday to combine forces to create the world's fourth-largest carmaker by production volume.

In a joint statement, Fiat Chrysler and Groupe PSA said the merger will be accomplished through an exchange of stock, resulting in shareholders holding 50% of each company. The new company will have combined revenues of nearly $189 billion (170 billion euros), producing some 8.7 million vehicles per year. PSA Peugeot CEO Carlos Tavares is set to head the new company, with Fiat Chrysler Chairman John Elkann assuming the role of chairman.

Fiat Chrysler, or FCA Group, has its corporate headquarters in Amsterdam, while Groupe PSA is currently based in a suburb of Paris. The merged company, to be based in the Netherlands, will own the Fiat, Dodge, Ram, Chrysler, Alfa Romeo, Maserati, Peugeot, DS, Citroën, Opel and Vauxhall brands. Its shares will be listed in Paris, Milan and New York.

In a statement, French Finance Minister Bruno Le Maire welcomed the deal, saying that the government in Paris would "be particularly vigilant over preserving (the group's) industrial footprint in France."

The deal comes after a similar merger plan between Fiat Chrysler and French automaker Renault fell apart in June.

None of Groupe PSA's brands is currently sold in the U.S. Peugeots were briefly marketed in the U.S., but the company pulled the brand from the American market in 1991 because of poor sales. However, PSA CEO Tavares said earlier this year that the company plans to reintroduce Peugeots to the U.S. by 2026.

The companies said their two boards of directors expect to produce a binding memorandum of understanding in the next few weeks.

According to the statement, the merger "would unite the groups' respective brand strengths across Luxury, Premium, Mainstream Passenger Car, SUV and Trucks & Light Commercial."

"In a rapidly changing environment, with new challenges in connected, electrified, shared and autonomous mobility, the combined entity would leverage its strong global [research and development] footprint and ecosystem to foster innovation and meet these challenges with speed and capital efficiency," the companies said.

Both companies "share the conviction that there is compelling logic for a bold and decisive move that would create an industry leader with the scale, capabilities and resources to capture successfully the opportunities, and manage effectively the challenges in the new era in mobility," the statement said.

When complete, the merger is expected to generate $4.1 billion (3.7 billion euros) in annual "synergies without any plant closures," the companies said.