Italian-American automotive giant Fiat Chrysler Automobiles (FCA) and French automaker PSA Peugeot are reportedly in talks to unveil a merger memorandum of understanding on Wednesday.

The merger, which was announced by the two companies earlier in October this year, would create a $50 billion auto company, the fourth largest in the world behind Volkswagen, Toyota and Renault-Nissan, producing 8.7 million cars a year.

Sources familiar with the development claim that it could be a 50-50 merger. However, with PSA seemingly controlling the merged company’s board and CEO Carlos Tavares in charge, the French carmaker will likely have the upper hand.

Fiat Chrysler chairman John Elkann will reportedly serve as the chairman of the new company. Fiat Chrysler CEO Mike Manley’s role remains unclear.

Fiat Chrysler has apparently been seeking an industrial partner to share investment costs as the industry advances towards autonomous cars and electrified powertrains. The company had previously struck a deal with French rival Renault which eventually collapsed after the French government expressed concerns over Nissan’s role in the partnership.

Evidently, PSA has support from the French government, which owns about 12% of PSA and has board representation. The French state is reportedly supporting a binding MoU that reflects minor changes to an agreement announced in October.

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The merger makes sense in order to establish a new world-class automotive leader with global scale to tackle the challenges of sustainable mobility, a French finance ministry official mentioned in a statement.

The French government still seems concerned about job cuts following the deal, since there is considerable overlap between Peugeot’s product lineup and Fiat’s small cars. The government however hasn’t shown resistance to a deal.

Tavares, who used to run Nissan in America and is familiar with U.S. market, will likely not hesitate from cutting unprofitable brands and models. Tavares is credited with turning around the Opel and Vauxhall brands in Europe which PSA had acquired from General Motors a couple of years ago.

FCA and Peugeot have not revealed any future plans but promised a deal by the end of the year.

Source credits: https://www.detroitnews.com/story/business/autos/2019/12/16/fiat-chrysler-and-psa-peugeot-will-announce-binding-merger-memo-wednesday/2666452001/