The PSA Group and Fiat Chrysler Automobiles have officially announced plans to merge, which would effectively create the fourth-largest global OEM in sales terms.

Both boards have given the mandate to their respective teams to finalise the discussions to reach a binding memorandum of understanding in the “coming weeks”.

In a joint statement, the two firms confirmed “discussions have opened a path to the creation of a new group with global scale and resources owned 50 percent by Groupe PSA shareholders and 50 percent by FCA shareholders”.

“In a rapidly changing environment, with new challenges in connected, electrified, shared and autonomous mobility, the combined entity would leverage its strong global R&D footprint and ecosystem to foster innovation and meet these challenges with speed and capital efficiency,” the statement said.

The proposed board of the new company Dutch-domiciled parent would be composed of 11 members. Five members would be nominated by FCA (including John Elkann as chairman) and five would be nominated by Groupe PSA (including the senior independent director and the vice chairman).

The chief executive officer would be Carlos Tavares for an “initial term of five years”, while he would also be a member of the board.

The PSA Group runs the Peugeot, Citroën, DS, Opel and Vauxhall brands, while FCA’s portfolio includes Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Lancia, Maserati and Ram, with Ferrari spun off from the group in 2016.