Fiat Chrysler Automobiles (FCA) and Peugeot maker PSA have reached a binding agreement over a roughly $50 billion merger that will reshape the global car industry.

Europe’s second and third biggest automakers, which are yet to decide on a name for their new company, announced preliminary plans six weeks ago for a 50-50 all-share tie-up that will rank as the world’s fourth-largest automaker.

Fiat Chrysler Chief Executive Mike Manley will remain with the new group set to result from a planned merger with French rival PSA-Peugeot, FCA Chairman John Elkann said on Wednesday.

In a letter to Fiat Chrysler employees on the day the two companies announced a binding agreement for a $50 billion tie-up to create the world’s fourth-largest carmaker, Elkann said he was “delighted” that the combined group would be led by current PSA CEO Carlos Tavares.

“And Mike Manley, who has led FCA with huge energy, commitment and success over the past year, will be there alongside him,” he said. He did not say what position Manley would hold.

Elkann - who will chair the new group - said there was still much to be done to complete the merger.

“Over the coming months we must work tirelessly and determinedly to fulfill all the approval requirements needed to finalize the commitment we have signed,” he said.

With a definitive agreement in place, the France’s PSA and Italian-American Fiat Chrysler Automobiles will now start work on how to reach a target of cutting costs by 3.7 billion euros ($4.1 billion) each year without closing factories.

That will be all the harder with strong labour unions in both France and Italy worried about job losses.

There will likely be horse-trading over which research and development centres will survive and talks will centre on which technologies will be embraced by the combined entity.

The firms said in a statement that they expected the deal to close in the next 12 to 15 months. They said they would come up with a name over the coming months.

The two sold a combined 8.7 million vehicles last year but have potential manufacturing capacity of 14 million vehicles, according to forecasters LMC Automotive.

The deal is aimed at helping both companies cope with slowing autos demand and the cost of building cleaner cars to meeting tougher emissions regulations.

The companies have yet to spell out precisely how they plan to tackle potential excess capacity, and which car platforms - or underlying structures of a vehicle - they will focus on, only detailing that a majority of production volume would be concentrated on two platforms.

“At this stage nothing is decided. We have been evaluating what the opportunities are,” Carlos Tavares, who will head up the merged entity as CEO, told reporters.

PSA shares rose 4%, while FCA stock was up 1.7%.

Before the merger is completed, one of PSA’s shareholders, China’s Dongfeng Motor Group, will trim its 12.2% stake in the French firm by selling 30.7 million shares to PSA.

That stake was worth 679 million euros ($748.4 million) at the most recent closing price, and Dongfeng will have 4.5% of the merged group. Its smaller stake is seen as helping the deal gain regulatory approval in the United States.

“This is the way of supporting this merger and making sure we don’t have bumps on the road,” Tavares said.

PSA and FCA confirmed the new group would have an 11-strong board, with five members nominated by PSA and another five by FCA. These will include labour representatives from both.

Tavares, whose initial five-year term as CEO will begin once the deal has closed and gained all approvals, will have the additional seat on the board.

A shock lawsuit by General Motors (GM) filed last month against FCA in the United State over alleged union bribing did not affect the merger terms, FCA CEO Mike Manley told reporters, reiterating the claim was “meritless”.

Manley said he hoped FCA would “now dispose of that quickly” and if not, the company would defend itself vigorously.

Ahead of the deal closing, FCA will pay its shareholders a 5.5 billion euro special dividend and hand investors its shares in robot-making unit Comau, which will be spun off.

Peugeot will distribute its 46% stake in auto-parts maker Faurecia to its shareholders, which was worth 3.2 billion euros based on Tuesday’s market value.

Fiat Chrysler will meet Italian trade unions in Turin on Friday to discuss the details of a merger deal with French rival PSA, the FIM-CISL union said on Wednesday.

Reuters