The 50-50 merger is expected to create synergies of 3.7bn euros (circa £3.2bn), a figure the firms said they expect to achieve without any factory closures - which had been a concern of unions in the UK, France and Italy. The "merger of equals" would give shareholders of both companies 50 percent of the new entity.
Under one recent proposal, Fiat and PSA have discussed making Tavares CEO of the combined company while John Elkann, scion of the Italian-American automaker's founding Agnelli family, would be chairman, one person said. Carlos Tavares will assume the position of Chief Executive Officer for an initial term of five years.
The merger could bolster PSA Groupe in efforts to return to the USA market, while Peugeot, Citroen, and Opel could help bootstrap Chrysler's presence in Europe and Eurasia, while supporting its continued growth in South America.
The new company, which has yet to be named, will be registered in the Netherlands, although it will "continue to maintain significant presences in the current operating head-office locations in France, Italy, and the United States".
FCA has already been in the news this year, where mergers are concerned. At its inception, the combined company would realize among the highest margins in the markets where it would operate, based on FCA's strength inNorth America and Latin America and Groupe PSA's in Europe. PSA is strong in Europe, and its brands are better mainstream cars built using more modern architectures. FCA has strong sales in the Americas and a decent portfolio of luxury brands and SUVs and trucks.
A combination with PSA would give FCA access to the French group's CMP modular platform, which was launched in 2019 for Peugeot's e-208 compact city vehicle, and donated for Opel to build the Corsa-e mini.
It's not the first time FCA had tried to do a merger with a French automaker.
The Peugeot SA lion logo sits on the front grille of an automobile on the forecourt of a PSA Peugeot Citroën new and used automobile showroom in Rodez, France, on Wednesday.
Before his death, it was FCA CEO Sergio Marchionne's vision to create a more consolidated automotive industry, and it seems like this is helping fulfill that vision.
Fiat Chrysler in June withdrew its offer for a €33bn (£28bn) merger with Renault, after the French government - Renault's largest shareholder - signalled that it did not support the deal.
The French state also owns 12% of PSA after bailing the carmaker out in 2014. Before it merges with Fiat, it'll hand shareholders its nearly 3 billion-euro stake in French parts maker Faurecia SE, leaving about 19.6 billion euros to be contributed to the new company.
Mike Manley, the CEO of Fiat Chrysler, said that he believed the merger to be a "potentially industry-changing combination".