Peugeot joins Fiat Chrysler in 50-50 deal

Merger expected to yield $4.1 billion in savings per year.

MILAN — The boards of Fiat Chrysler Automobiles and PSA Peugeot on Wednesday signed a binding merger creating the world’s fourth-largest automaker with the scale to confront the challenges of stricter emissions regulations and the transition to new driving technologies.

The companies said in a joint statement the new group will be led by PSA’s cost-cutting CEO Carlos Tavares, with Fiat Chrysler’s Chairman John Elkann as head of the board of the merged group. Fiat Chrysler CEO Mike Manley will stay on, though it was unclear in what capacity.

No name for the new company has been decided, executives said, but Tavares and Manley insisted it was not a “touchy subject.”

The merger is expected to yield 3.7 billion euros ($4.1 billion) in savings a year, which will be invested in “the new era of sustainable mobility” and to meet strict new emissions regulations, particularly in Europe.

“‘The merged entity will maneuver with speed and efficiency in an automotive industry undergoing rapid and fundamental changes,” the companies’ statement said.

The new technologies include electrified engines, autonomous driving and connectivity, part of what Tavares described as “’the transition to a world of clean, safe and sustainable mobility.” Both companies have lagged in developing electric cars in particular.

The deal, first unveiled in October, was billed as a 50-50 merger, but PSA has one extra seat on the board and Tavares at the helm,

giving the French carmaker the upper hand in daily management.

The executives said they expect the deal to take 12-15 months to close. It will create a company with revenues of nearly 170 billion euros (nearly $190 billion) and producing 8.7 million cars a year — just behind Volkswagen, the Renault-Nissan alliance and Toyota.

No plants will be closed under the deal, the companies said. Savings will be achieved by sharing investments in vehicle platforms, engines and technology, while leveraging scale on purchasing.

But the executives also said there would be cuts. Decisions on where those will come will be made after the deal closes.

“There is room for sharing (a) significant amount of existing platforms and avoiding excess investments for the future,” Tavares said.

Fiat Chrysler shares rose nearly 1% in Milan, while Peugeot gained almost 2% in Paris trading.

Both the Peugeot and Fiat brands are strong on small car technology, with significant overlap in Europe. Manley said that the convergence of platforms would be “an early target” that will likely take two years to achieve.