Just Married: Fiat Chrysler and Peugeot Citroen

With combined annual sales of about 8.7 million vehicles, the proposed conglomerate would sit behind Volkswagen Group, the Renault-Nissan-Mitsubishi Alliance and Toyota Motor Corporation in the global automotive pecking order.

The deal would create the fourth-largest auto manufacturer globally, in terms of annual sales - at about 87 lakh vehicles behind Volkswagen Group, Toyota and the Renault-Nissan-Mitsubishi alliance, as well as revenues of 170 billion Euros and a recurring operating profit of over 11 billion Euros.

European automakers have been looking to mergers and alliances for years to share R&D costs and tackle the issue of overproduction on the continent.

It was less than five months ago that FCA abandoned merger talks with PSA's French rival Renault, and the move comes as carmakers grapple with a downturn in their markets as well as hefty investments in electric and self-driving vehicles. That did not take place this time around.

"PSA shareholders are assuming more market risk than FCA's", Houchois said, although he added an FCA-PSA deal was still the most logical and attractive combination in the industry.

The merger would bring together Italian-American Fiat Chrysler, with its strong footprint in North America where it makes at least two-thirds of its profits, and France's PSA Peugeot, the No. 2 automaker in Europe. Fiat Chrysler's board meeting was still in progress while the board of Exor, the Agnelli family holding company that controls the Italian-American auto maker, was scheduled to meet later on Wednesday night.

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Milan-listed shares in Fiat Chrysler opened up more than 10% on Wednesday, after ending up more than 7.5% on Tuesday in NY.

Today's announcement also stated there are estimated synergies of 3.7 billion Euros annually "without any plant closures resulting from the transaction".

The decision is still to be finalized in a memorandum of understanding in the coming weeks, but both brands have agreed to proceed. FCA said the French government scuppered those talks over the role of Nissan in a reformed entity, but there were also brewing issues with French unions, and ongoing turmoil among Renault and Nissan leadership thanks to continuing fallout from ex-CEO Carlos Ghosn's arrest past year. Marchionne's goal for a merger was to expand FCA's global reach by broadening its product portfolio, increasing its technical capabilities, and reducing debt. Five board members would be nominated by FCA including John Elkann as Chairman and five would be nominated by Groupe PSA including the Senior Independent Director and the Vice-Chairman.

It would continue "to maintain significant presences in the current operating head-office locations" in France, Italy and the United States, the statement said. It demonstrated that turnaround with the recent acquisition of Opel-Vauxhall, long the money-losing subsidiary of GM.

"The French government is a part-shareholder of Peugeot so it will also be keen to maintain jobs and capacity in France".

  • Darren Santiago