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Fiat Chrysler and Peugeot agree to $50 billion merger

Fiat Chrysler and Peugeot maker PSA deal with the challenge of winning over regulators and delivering on a commitment to cut costs without shutting down factories after sealing a binding deal to form the world’s fourth biggest automaker.

Both tasks are likely to prove difficult, as two of the industry’s oldest dynasties attempt to combine significant European operations under the gaze of politicians and trade unions who have pledged to resist any move to slash jobs.

Success is important to help both firms deal with a downturn in demand and the cost of making cleaner vehicles to meet strict emissions regulations.

In a sign of the pressures on the broader industry, Volvo agreed on Wednesday to sell its Japan-based UD Trucks business to Isuzu Motors and share technology in order to help cut expenses.

France’s PSA and Italian-American Fiat Chrysler Automobiles (FCA) declared a preliminary deal six weeks before for an all-share merger that would form a company worth about $50 billion and unite brands including Fiat, Jeep, Dodge, Ram and Maserati with the likes of Peugeot, Opel, and DS.

The terms were little modified in the binding deal declared on Wednesday, including a target to cut expenses by 3.7 billion euros ($4.1 billion) a year without shutting factories.

However, experts stated the effective premium being paid by PSA to achieve the 50-50 split was slightly lower.

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