Fiat Chrysler Automobiles (FCA) and Peugeot SA (Groupe PSA) have signed a ‘binding Combination Agreement’ providing for a 50/50 merger of their businesses to create the world’s fourth-largest automotive OEM by volume and third-largest by revenue.

The gains in efficiency derived from larger volumes, as well as the benefits of uniting the two companies’ strengths and core competencies, “will ensure the combined business can offer all its customers best-in-class products, technologies and services and respond with increased agility to the shift taking place in this highly demanding sector”.

The combined company will have annual unit sales of 8.7 million vehicles, revenues of nearly 170 billion euros (based on their aggregated 2018 results).

Moreover, the combined entity will have a “balanced and profitable globalpresence, with a highly complementary and iconic brand port-folio covering all key vehicle segments from luxury, premium and mainstream passenger cars through to SUVs and trucks and light commercial vehicles”.

The new group will also have ‘much greater geographic balance’, with 46% of revenues derived from Europe and 43% from North America (based on the aggregated 2018 results).

Furthermore, the efficiencies that will be gained from “optimising investments in vehicle platforms, engine families and new technologies while leveraging increased scale” will enable the business to enhance its purchasing performance.

More than two-thirds of ‘run rate volumes’ will be concentrated on two platforms, with about 3 million cars per year on each of the small platform and the compact/mid-size platform.

Completion of the proposed merger is expected to take place in 12-15 months’ time, subject to the usual conditions, including approval by both companies’ shareholders.

Carlos Tavares, chairman of the managing board of Groupe PSA, said: “Our merger is a huge opportunity to take a stronger position in the auto industry, as we seek to master the transition to a world of clean, safe and sustainable mobility and to provide our customers with world-class products, technology and services.”

Mike Manley, CEO of FCA (www.fcagroup.com), added: “This is a union of two companies with incredible brands and a skilled and dedicated workforce.

“Both have faced the toughest of times and have emerged as agile, smart and formidable competitors.”