Shareholders of each automaker would own 50% of the combined operation, the companies said in a joint statement on Thursday. A binding agreement could be finalized within weeks, the statement said.

The combined company would be based in the Netherlands, which is the current headquarters of Fiat Chrysler. John Elkann, the current chairman of Fiat Chrysler (FCAU), would perform the same role at the combined company, while PSA Group chief executive Carlos Tavares would be CEO.
The company would rank among the largest automakers in the world. Fiat Chrysler and PSA (PUGOY) sold a combined 8.7 million vehicles last year, just ahead of GM (GM), which sold 8.3 million, and not far behind Volkswagen (VLKAF) and Toyota (TM), which each sold over 10 million.

The merger comes amid a global sales slowdown. At the same time, carmakers are scrambling to invest in the electric and hybrid technologies needed to meet strict new emissions targets in China and Europe. The autonomous vehicles of the future also present a threat to traditional industry business models.

The huge amount of capital needed to meet these new challenges has forced some automakers to find partners and turned others into acquisition targets.

“We view the combination of these two companies as reasonable given global competition, high capital intensity, and industry disruption from electrified powertrain as well as autonomous technologies,” Richard Hilgert, a senior equity analyst at Morningstar, said in a research note on Wednesday.



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