Fiat Chrysler and rival PSA Group, owner of Peugeot and Vauxhall, have confirmed a $50bn (£30.8bn) merger deal.
The deal, which is aiming for annual cost savings of $4bn through shared purchasing agreements and combined technologies, will create the world’s fourth-largest carmaker.
PSA boss Carlos Tavares will become chief executive of the new company and will also have a seat on its board.
The deal is Fiat Chrysler’s second attempt at a merger this year.
The carmaker had originally proposed a merger with its French rival Renault for £29bn, but pulled out of the deal in June following intervention from the French government, which has a 15% stake in Renault. The deal would have created the world’s third-largest carmaker.
The merger of Fiat Chrysler and France’s PSA is expected to be completed within the next 12 to 15 months.
Before the merger is completed, China’s Dongfeng Motor Group will be cutting its 12.2% stake in the French carmaker by selling 30.7 million shares to PSA.
The deal has raised concerns at Vauxhall, which employs 3,000 people in the UK, as it could be vulnerable to any restructuring. However, the two firms say they have not decided which car production facilities the new merged company will use.
“Merger talks combined with Brexit uncertainty is deeply unsettling for Vauxhall’s UK workforce which is one of the most efficient in Europe,” said Unite national officer Des Quinn in October.
“The fact remains, merger or not, if PSA wants to use a great British brand like Vauxhall to sell cars and vans in the UK, then it has to make them here in the UK.”
And in November, US rival General Motors sued Fiat Chrysler, claiming it bribed union officials over many years to gain advantages that cost General Motors millions of dollars.
Fiat Chrysler has denied the allegations, claiming that General Motors was trying to disrupt its merger plans. On Wednesday, Fiat Chrysler’s boss Mike Manley said the lawsuit had not affected the terms of the merger.