The boards of Fiat Chrysler Automobiles and the Peugeot owner, Groupe PSA, have approved a €40bn (£35bn) merger that would create the world’s fourth-biggest carmaker. 

The Italian and French companies said the 50-50 tie-up would create a company with annual vehicle sales of 8.7m, revenues of €170bn and operating profits of more than €11bn.  It is expected to generate savings and other benefits of €3.7bn without any factory closures, the companies said. 

However, unions said they were still seeking assurances that there would be no job losses.  The Unite union said it was seeking urgent meetings with executives to discuss the jobs of 1,100 workers at PSA’s Vauxhall’s factory in Ellesmere Port, Cheshire. 

In June, PSA warned that the future of the site depended on a good Brexit deal.  A further 1,200 workers make Vauxhall vans in Luton, Bedfordshire. 

Carlos Tavares, chief executive of PSA, will become chief executive of the new company, while the Fiat chair, John Elkann, will become its chair.  The brands would range from FCA’s Jeep SUVs, Dodge muscle cars and luxury Maseratis to PSA’s Citroen family cars and Vauxhall vans. 

The agreed deal comes months after a similar merger attempt between FCA and PSA’s French rival Renault fell apart, with the companies blaming the intervention of the French government, Renault’s largest shareholder. 

The French state also owns 12% of PSA after bailing the carmaker out in 2014.  However, the failed Renault proposal was complicated by its alliance with the Japanese carmaker Nissan, and analysts are more confident that the new deal will go through. 

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Mike Manley, FCA’s chief executive, said the leaderships of the two companies had a “personal rapport” and that the deal represented a compelling opportunity for “smart industry consolidation”.  He also added that the merger would help the company to solve some of its own structural issues in a call for investors on Thursday. 

Both boards agreed unanimously to back the deal on Wednesday night.  The speed of the agreement came as a surprise, given the French government’s previous reluctance to back the proposed merger between FCA and Renault, according to Tom Narayan, an analyst at Royal Bank of Canada (RBC).  PSA’s recent strong performance may have made it easier for the French government to accept a deal, he said. 

The new company will be incorporated in the Netherlands, a neutral location, but it would retain stock market listings in Paris, Milan and New York, as well as maintaining “significant presences” in major office locations in France, Italy and the US. 

The deal would unite two of Europe’s grandest carmaking dynasties after multiple attempts at talks through the years, with the Peugeot family, which holds 12.2% of PSA, joining forces with the Agnelli family, whose holding company Exor owns 29% of FCA.  FCA boss John Elkann is a scion of the dynasty. 

Access to PSA’s technology could also give FCA an easier path to complying with stringent European carbon dioxide emissions regulations that are due to kick in next year. . 

“We believe that ultimately the Agnelli family likely just wants a solution to FCA’s European CO 2 dilemma by combining it with another European carmaker that already has a CO 2 plan,” RBC’s Narayan said. 

The joint statement on the merger said: “The plan to combine the Groupe PSA and FCA businesses follows intensive discussions between the senior managements of the two companies. 

“Both share the conviction that there is compelling logic for a bold and decisive move that would create an industry leader with the scale, capabilities and resources to capture successfully the opportunities and manage effectively the challenges of the new era in mobility.”