The board of French car maker PSA, the owner of Peugeot, approved a binding memorandum of understanding (MoU) to merge with rival Fiat Chrysler, a source close to the matter said on Tuesday.
A separate Fiat Chrysler (FCA) board meeting was under way to discuss finalizing an initial agreement for a $50 billion merger to create the world’s number four car maker, the source added.
PSA declined to comment. FCA was not immediately available for comment.
A source close to FCA had said earlier the two companies could announce the signing of a binding agreement early on Wednesday, followed by a conference call to explain further details later in the day.
The two mid-sized car makers announced plans six weeks ago for a tie-up to help them deal with big challenges in the industry, including a global demand downturn and the need to develop costly cleaner cars to meet looming anti-pollution rules.
Ahead of the meetings, entities representing the Peugeot family, Etablissements Peugeot Freres (EPF) and FFP, unanimously approved a proposed memorandum of understanding for the planned merger, a source familiar with the situation said.
FCA and PSA have said they would seek to finalize a deal by the end of the year to create a group with 8.7 million annual vehicle sales.
That would put it fourth globally behind Volkswagen, Toyota and the Renault-Nissan alliance.
FCA would get access to PSA’s more modern vehicle platforms, helping it to meet tough new emissions rules, while Europe-focused PSA would benefit from FCA’s profitable U.S. business featuring brands such as Ram and Jeep.
However, the deal could still face close regulatory scrutiny, while governments in Rome, Paris and unions are all likely to be wary about potential job losses from a combined workforce of around 400,000.
PSA’s Carlos Tavares will be chief executive and FCA’s John Elkann – the scion of Italy’s Agnelli family, which controls FCA through their holding company Exor – chairman of the combined company.
The group will include the Fiat, Jeep, Dodge, Ram, Chrysler, Alfa Romeo, Maserati, Peugeot, DS, Opel and Vauxhall brands, allowing it to serve mass and premium passenger car markets as well as those for trucks and light commercial vehicles.