PSA Group and Fiat Chrysler Automobiles agreed Thursday to combine, pooling resources to confront an expensive new era of trade tariffs, emissions rules and electrification.
The boards of Fiat Chrysler and PSA Group said they would work toward a binding agreement in the coming weeks in a joint statement. The accord would create the world’s fourth-largest automaker with a combined market value of about $50 billion, based on current prices.
Shareholders of each company will own 50 percent of the combined entity. Investors in FCA will receive a dividend of 5.5 billion euros ($6.1 billion), while PSA plans to distribute its 46 percent stake in supplier Faurecia.
Cost savings from the deal without plant closures might be as much as 3.7 billion euros.
A merger of FCA and PSA, the No. 2 for car sales in Europe, would create a regional powerhouse to challenge Volkswagen Group.
The tie-up would bring together the billionaire Agnelli clan in Italy and the Peugeot family of France as consolidation sweeps through an industry trying to finance major transformation.
The 11-member board of the new group will include five from PSA and five from Fiat Chrysler. PSA CEO Carlos Tavares will be CEO and be on the board while FCA Chairman John Elkann stays in that role.
It’s unclear what role Fiat Chrysler CEO Mike Manley will hold.
The announcement comes several months after FCA and PSA explored a partnership on pooling investment to build cars in Europe, and following the collapse in June of negotiations between Fiat and French competitor Renault.
“It’s not as good a partner as Renault, but any partnership is good,” said Felipe Munoz, an analyst with JATO Dynamics in Turin. Fiat Chrysler “is not facing very good times, and it seems it’s getting worse as the time passes.”
Both PSA and Fiat Chrysler lag on investments in electrification and neither has a strong presence in China, but a combination could help them grow in the lucrative commercial vehicle market in Europe, Munoz said.
Fiat Chrysler, which reports third-quarter earnings on Thursday, is suffering in Europe with an aging Jeep lineup and lack of SUVs under the Fiat brand, he said.