Auto giants Fiat Chrysler and the PSA Group, the French owner of Peugeot and Vauxhall, have struck a merger pact that would create the world's fourth-largest carmaker.

The two parent companies said on Wednesday they had agreed on a binding merger in a $50 billion deal that would reshape the global industry, as car manufacturers worldwide contend with a decline in demand.

The companies — two of Europe's largest — would have combined revenues of almost 170 billion euros ($189 billion), and operating profits of 11 billion euros, according to the Financial Times. The deal creates the second-largest carmaker in Europe, behind Volkswagen.

A new name is yet to be announced for the tie-up that will result in an industry leader with greater scale and ability to invest in new technologies, such as the development of electric vehicles and self-driving systems.

No plants will close as a result of the merger, which is expected to result in annual cost savings of around 3.7 billion euros through shared purchasing agreements and combined technologies.

The companies will have a combined stock market value of $46 billion, will employ 400,000 people around the world and sell 8.7 million cars a year.

In a joint statement, the companies said: "With its combined financial strength and skills, the merged entity will be particularly well placed to provide innovative, clean and sustainable mobility solutions, both in a rapidly urbanizing environment and in rural areas around the world.

"The gains in efficiency derived from larger volumes, as well as the benefits of uniting the two companies' strengths and core competencies, will ensure the combined business can offer all its customers best-in-class products, technologies and services and respond with increased agility to the shift taking place in this highly demanding sector."

PSA and US-Italian carmaker Fiat Chrysler, known as FCA, said they expected the transaction to be complete within 12 to 15 months, subject to shareholder approval and regulatory clearances.

Before the merger is completed, China's Dongfeng Motor Group will be cutting its 12.2 percent stake in the French carmaker by selling 30.7 million shares to PSA.

PSA boss Carlos Tavares will become chief executive of the new company and will also have a seat on its board.

The statement said the new group's Dutch-domiciled parent company will be listed on Euronext (Paris), the Borsa Italiana (Milan) and the New York Stock Exchange and will benefit from its strong presence in France, Italy and the US.