Fiat Chrysler (FCA.MI) and Peugeot owner PSA Group have been given the green light to merge, paving the way for the joint company to become the world’s fourth biggest car manufacturer.
The European Commission said the companies plan to make vehicles at French and Spanish plants for Toyota Motor Corp (TM) and aim to cut transfer prices for the vehicles, spare parts and accessories to address EU competition concerns.
It will also open up its repair network to rivals, eliminating concerns about the combined firm’s growing power over small vans crucial to deliveries.
“Access to a competitive market for small commercial vans is important for many self-employed and small and medium companies throughout Europe,” EU Competition Commissioner Margrethe Vestager said in a statement on Monday. “Their commitments will facilitate entry and expansion in the market for small commercial vans.”
The $38bn (£28bn) deal will see brands such as Jeep, Dodge, Maserati and Opel come under one roof, with the merged entity to be called Stellantis.
However, the new entity will not mean people driving Stellantis-badged cars. All the companies’ current marques will remain as they are and the name will only be used at a corporate level.
Shareholders will vote on the plan at separate meetings scheduled for 4 January.
The approval comes a year after Fiat and PSA first announced the tie-up in December 2019. The automotive industry has since battled with slowing demand and declining sales as the coronavirus pandemic took hold.
A combined company was expected, before COVID-19, to sell about 8.7 million vehicles a year, behind VW Group and the Renault-Nissan-Mitsubishi alliance at about 10.8 million each, and Toyota at 10.6 million.
In recent years manufacturers have sought alliances to alleviate the costs of developing and producing electric cars and self-driving vehicles.
In October, law firm PGMBM issued a case in the High Court of Justice in London against Fiat over an alleged diesel emissions scandal.
The case claims that half a million drivers in England and Wales could be compensated £10,000 ($12,939) each — which technically projects to a potential £5bn liability for Fiat Chrysler — related to vehicles they bought or leased since 2008.
The case revolves around Fiat Chrysler allegedly misleading customers and authorities over the harmful level of emissions produced by certain models.
A Fiat spokesperson told Yahoo Finance UK at the time: “FCA believes this claim to be totally without merit and we will vigorously defend ourselves against it.”
Watch: Why can't governments just print more money?