PARIS -- PSA Group and Fiat Chrysler Automobiles have revised the terms of their planned merger to conserve cash during the coronavirus pandemic.
PSA will hold onto its stake in parts supplier Faurecia and FCA will cut the cash portion of a 5.5 billion euro ($6.5 billion) special dividend.
Once combined, the new company will be called Stellantis.
“With this new decisive milestone, we are moving all together towards our goal in the best possible condition with even greater prospects for Stellantis," PSA CEO Carlos Tavares said in a statement on Monday. "I would like to take this opportunity to warmly thank the teams who have built reciprocal relations of trust, including during the COVID-19 confinement."
FCA will cut to 2.9 billion euros ($3.44 billion) the cash portion of a special dividend its shareholders are set to receive under the terms of the merger accord, the statement said.
PSA, in turn, will scrap the spin-off of its 46 percent stake in Faurecia. The supplier was capitalized at 5.9 billion euros ($7 billion) at Monday's market closing, the companies said.
The groups said that Stellantis would now have an extra 2.6 billion euros in cash and, in light of the companies' performance and market conditions, they would consider distributing 500 million euros to the shareholders of each company before the closing of the merger, or 1 billion euros after.
Shares of FCA closed Tuesday's trading up 7.4 percent to $12.81 in New York.
FCA CEO Mike Manley said in the statement: "Today’s announcement is a further, strong signal of a common determination to ensure that Stellantis has all the resources it needs to apply its unique assets, its creative energies and many opportunities to the creation of superior value for all our stakeholders.”
FCA and PSA said annual estimated synergies from their merger were now seen over 5 billion euros, compared with an initial estimate of over 3.7 billion euros.
The two carmakers confirmed that they expected to complete their tie-up process by the end of first quarter of next year.
Faurecia, which makes a wide variety of interiors and other parts for automakers, ranks No. 8 on the Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $19.9 billion in 2019.
The amendments preserve the balance of original combination agreement, the two groups said.
A source said on Monday that the aim of those changes was to reinforce the balance-sheet structure of both companies after the COVID-19 crisis and ensure that the merger plan is concluded as soon as possible.
Analysts had argued that the 5.5 billion euro payout to FCA shareholders, led by controlling investor EXOR, the holding company of Italy's Agnelli family, could weaken the new carmaker's finances, as the auto industry was paying a high price for the coronavirus outbreak this year.
Both carmakers earlier this year scrapped dividend payments on 2019 results, each worth 1.1 billion euros.
Reuters and Automotive News contributed to this report