Fiat Chrysler & Peugeot to Merge, Become World’s 3rd Largest Car Manufacturer

The terms of the $48 billion merger of Fiat Chrysler and PSA Group, owner of Peugeot, have been announced. This will become the joint company the third-largest automaker in the world and help in reducing the large cost of developing electric and autonomous vehicles.

Shareholders of each company will own 50% of the combined entity, the automakers said in a joint statement on Thursday adding that within the next few weeks, the final agreement could be finalized. A special one-time dividend worth $6.1 billion will be given to Fiat Chrysler shareholders as part of the merger.

The combined operation will use Netherlands as its base, the present headquarters of Fiat Chrysler, but it will keep a head office for its North American operations near Detroit. The chairman of the new operation will be John Elkann, the US-born head of the Italian family that established Fiat, with PSA chief executive Carlos Tavares as CEO.

The new company will have an estimated 410,000 employees and annual returns of $190 billion. Last year, Fiat Chrysler (FCAU) and Peugeot sold a combined 8.7 million vehicles, marginally ahead of General Motors , which sold 8.3 million, and just behind Volkswagen and Toyota, that saw sales of 10 million.

Jessica Caldwell, Edmunds’ executive director of industry analysis, said the merger “isn’t really about product or expanding to new markets.” Instead, it’s about funding research into the vehicles of the future.

“The electrified, autonomous future everyone is waiting for just isn’t feasible without automakers merging and forming strategic alliances to share research and development costs,” she said. “This is a smart move by both Fiat Chrysler and PSA to ensure their companies continue to be viable and relevant as the industry evolves.”