Fiat Chrysler Automobiles (NYSE: FCAU) and Peugeot maker PSA have reached a binding agreement over their roughly $50-billion merger that will reshape the global car industry.
France’s PSA and Italian-American Fiat Chrysler (FCA), which are yet to decide on a name for their new company, will now start work on delivering their pledge to cut costs by 3.7 billion euros ($4.1 billion U.S.) a year without closing factories.
That will be all the harder with politicians and strong labour unions in both France and Italy worried about job losses at a combined business that will employ around 400,000 people.
PSA and FCA announced preliminary plans six weeks ago for a 50-50 all-share tie-up that will rank as the world’s fourth-largest automaker behind Volkswagen (OTC:VWAGY), Toyota (NYSE:TM) and the Renault-Nissan alliance.
The deal is aimed at helping both companies cope with slowing autos demand and the cost of building cleaner cars to meeting tougher emissions regulations.
With brands including Jeep, Dodge, Ram, Chrysler, Alfa Romeo, Maserati and Opel, the companies sold a combined 8.7 million vehicles last year, but have potential manufacturing capacity of 14 million, according to forecasters LMC Automotive.
PSA and FCA said in a statement they expected the deal to close in the next 12 to 15 months, and they would come up with a name over the coming months.
FCA said it would meet unions on Friday to discuss the merger.
FCAU shares opened in New York Wednesday lower by 17 cents, or 1.1%, to $15.16