DETROIT -- It's official: Fiat Chrysler Automobiles and PSA Groupe intend to merge operations.
The companies early Thursday announced their plans for a 50-50 joint shareholder-owned entity that they said would save $4.11 billion (3.7 billion euro) annually without plant closures. The companies would have combined revenues of $189.06 billion (170 billion euro) with profits of more than $12.23 billion (11 billion euro) based on 2018 figures.
The announcement, which comes only days after word of serious talks leaked, shakes up the global automotive industry at a time of transition. Together, the companies will create the fourth-largest automotive group in the world and likely put pressure on other automakers to consider consolidation as the global auto market slows and companies look for ways to pay for the development of self-driving technology and electrification.
It's not clear what the new company will be called.
The pairing will bring together brands as diverse as FCA's Jeep, Ram, Dodge, Chrysler, Fiat, Alfa Romeo and Maserati with PSA's Peugeot, Citroen, Opel, Vauxhall and DS Automobiles. Should it be finalized, the combined FCA/PSA will carry out the vision of former FCA CEO Sergio Marchionne of a more consolidated automotive industry. Marchionne, who died unexpectedly last year, had unsuccessfully sought partners in companies including General Motors and Volkswagen.
A move by FCA to merge with PSA's French rival Renault earlier this year was derailed by political considerations in France.
FCA sold more than 4.6 million vehicles worldwide last year, while PSA sold 3.96 million, according to LMC Automotive. FCA's top markets are the United States, Italy and Brazil; PSA's are France, the United Kingdom and Germany.
The companies would combine under a Dutch parent company, with a board of 11 members, five nominated by FCA and five by PSA. Carlos Tavares, CEO of PSA Groupe, would be CEO of the new company; FCA Chairman John Elkann would retain his role. Details on next steps were not immediately available, although a news release said both company boards had given the OK to finalize discussions toward a binding memorandum of understanding in the coming weeks.
Officials from both FCA and PSA cheered the news.
"This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity. I'm pleased with the work already done with Mike (Manley) and will be very happy to work with him to build a great company together," Tavares said.
FCA CEO Mike Manley offered similar thoughts.
"I'm delighted by the opportunity to work with Carlos and his team on this potentially industry-changing combination. We have a long history of successful cooperation with Groupe PSA and I am convinced that together with our great people we can create a world class global mobility company," Manley said in the release.
The new company would be listed on the Paris, Milan and New York stock exchanges and continue to maintain "significant presences" at current head offices in France, Italy and the United States. FCA currently has its U.S. headquarters in Auburn Hills, north of Detroit.
FCA shareholders would receive a $6.12 billion (5.5 billion euro) special dividend.
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