PSA and FCA have announced plans to merge as part of a plan to create the fourth largest car manufacturer group.

PSA Group is the owner of brands including Peugeot, Citroen, DS and Vauxhall, while FCA brands include Fiat, Alfa Romeo, Jeep and Maserati.

Both boards approved the deal, which the brands said could help save £3.2 billion a year through a more efficient allocation of resources for investments in vehicle platforms, powertrains and technology, and from enhanced purchasing capability due to the combined group’s new scale.

Crucially, the firms said there are no plans to close factories as part of the 50/50 merger.

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PSA CEO and chairman Carlos Tavares is set to become CEO of the newly-combined company, while FCA chairman John Elkann is set to become its chairman.

Tavares said: “This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity. I’m pleased with the work already done with Mike and will be very happy to work with him to build a great company together.”

Mike Manley, FCA’s current CEO, said, “I’m delighted by the opportunity to work with Carlos and his team on this potentially industry-changing combination. We have a long history of successful cooperation with Groupe PSA and I am convinced that together with our great people we can create a world class global mobility company.”