Fiat Chrysler and PSA merge to lead market

Fiat Chrysler and PSA of France announced Thursday that they planned to merge to create the world’s fourth largest automaker, a company that would produce slightly more cars than American icon General Motors.

The deal comes as the industry is facing broad tensions: New technologies are demanding deep investments, global sales are flattening and consumers are even reconsidering the appeal of car ownership.

But Fiat and PSA, the maker of Peugeot and Citroën cars, are imperfect partners.

The companies have similar weaknesses, including a reliance on a slowing European market and few sales in China, the world’s largest new car market. What the combined company certainly would have is size. With annual sales of 8.7 million vehicles, it would be the biggest automaker behind the Renault-Nissan alliance, Volkswagen and Toyota.

In Europe, Fiat and PSA will surpass Volkswagen to become market leaders. They also have a strong lineup of SUVs, which are increasingly popular with European buyers.

However, the overall European market has been in a long decline.

“Both groups would control Europe’s fastest growing segment and the source of profits,” said Felipe Munoz, senior analyst at Jato Dynamics. “However,” he said in an email, “both companies lag behind rivals in terms of electrification.”

The automakers described the transaction as a way to share the enormous cost of an industrywide transition to electric and autonomous vehicles.

Fiat Chrysler’s chief executive, Mike Manley, said the companies had “plenty of work to do” before reaching a formal agreement but declared that a merger “is very compelling” for both companies.

Carlos Tavares, the chief of PSA, is to be the chief executive of the new company.

The merger will be accomplished by exchanging shares, with each company contributing 50 percent of the new entity. Shareholders of Fiat Chrysler will receive a special dividend of $6.1 billion. PSA shareholders will receive a special dividend of about $3.3 billion from the sale of the company’s stake in Faurecia, an auto-parts maker.

Investors in the two companies reacted differently Thursday as they sorted through the deal’s details. Fiat Chrysler shares jumped by about 9 percent in Italian trading, while PSA’s fell more than 11 percent.

The parent company will be registered in the Netherlands, which offers some preferential tax laws.