Dec. 18 (UPI) -- Fiat Chrysler and Peugeot have agreed to a $50 billion merger that would create the world's third-largest automaker, both companies announced Wednesday.
FCA and Peugeot have long been fierce competitors, but said the deal will enable them to cut costs by $4.1 billion a year without resorting to factory closures as the industry transitions further to electric and self-driving vehicles.
The companies first signaled their intent to merge in October.
"This is a union of two companies with incredible brands and a skilled and dedicated workforce," Fiat Chrysler CEO Mike Manley said in a statement. "Both have faced the toughest of times and have emerged as agile, smart, formidable competitors. Our people share a common trait -- they see challenges as opportunities to be embraced and the path to making us better at what we do."
Carlos Tavares, chairman of Peugeot parent company Groupe PSA, said the 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."
The combined company is projected to earn annual unit sales of 8.7 million vehicles, which would make it the world's No. 4 automaker by volume and third-largest by revenue (nearly $189 billion). It will see recurring operating profits of more than $12 billion and an operating profit margin of 6.6 percent.
With the cost savings, they said, the combined automaker will be better positioned to fund development of "technologies and services that will shape mobility in the future while meeting the challenging global CO2 regulatory requirements."
FCA and Peugeot expect to close the deal in about a year.
As part of the agreement, Chinese automaker Dongfeng Group will sell back part of its stake in Groupe PSA, to satisfy U.S. regulations.