Fiat Chrysler and PSA Peugeot are to merge and create the world's fourth-largest vehicle maker with combined revenues of 170 billion euros (£146 billion).
The 50-50 merger is expected to create synergies of 3.7 billion euros (£3.2 billion), a figure the firms expect to achieve without any factory closures - a concern of unions in France and Italy where they have more model overlap. PSA employs around 3000 people at its Vauxhall factory in Ellesmere Port, Cheshire.
Once a merger is finalised, PSA Peugeot CEO Carlos Tavares will be chief executive of the new company with Fiat Chrysler chairman John Elkann taking the role of chairman.
The companies said the new company would be able to meet the challenges of powertrain electrification, connectivity and autonomous driving "with speed and capital efficiency".
The combined company will be able to share the cost of developing those technologies with their "strong global R&D footprint", they said. They will also save on investments in vehicle platforms and save money with greater purchasing power.
Both companies "share the conviction that there is compelling logic for a bold and decisive move that would create an industry leader with the scale, capabilities and resources to capture successfully the opportunities, and manage effectively the challenges in the new era in mobility", the statement said.
The merger decision comes about five months after a similar deal to merge Fiat Chrysler with French rival Renault fell apart.
