The boards of Fiat Chrysler Automobiles and Peugeot maker PSA Group were meeting separately on Tuesday to discuss finalizing an initial agreement for a $50 billion merger to create the world’s number four automaker, people familiar with the matter told Reuters.
A person close to FCA said the two companies could announce the signing of a binding memorandum early on Wednesday, followed by a conference call to explain further details later in the day.
Ahead of the meetings, entities representing the Peugeot family, Etablissements Peugeot Freres and FFP, unanimously approved a proposed memorandum of understanding for the planned merger, a person familiar with the situation said.
The French state, which owns about 12 percent of PSA and has board representation, supports a binding memorandum of understanding that reflects minor changes to an accord unveiled by the two automakers on Oct. 31, Bloomberg reported on Monday. The combination “makes sense in order to build a new champion with global scale to take on the challenges of sustainable mobility,” a French finance ministry official said in a statement.
FCA and PSA announced their plan six weeks ago to create an automotive powerhouse that would challenge Volkswagen Group in Europe, while maintaining Chrysler’s Detroit 3 presence in the U.S.
The new company would be based in the Netherlands and headed by PSA CEO Carlos Tavares. Fiat Chrysler Chairman John Elkann would keep his role as chairman.
The deal will turn two midsize automakers into a global giant, with sales of more than 8 million vehicles a year and a stable of brands including PSA’s Peugeot and Citroen and Fiat Chrysler’s Jeep, Alfa Romeo and Ram.
The automakers are responding to growing pressure on the industry to pool resources for product development, manufacturing and purchasing in the face of trade tensions, a global sales slowdown and an expensive shift toward electric and self-driving technology.
Reuters and Bloomberg contributed to this report