Volkswagen and Ford will merge their diesel units in a deal valued at $7 billion, the Wall Street Journal reported on Tuesday.

    The new business will form the new Volkswagen Group, and Ford’s Landair will be taken over by a unit of Volkswagen.

    The deal, which was approved by U.K. regulators last week, will help keep the two companies on track to reach a global fleet of more than 500,000 diesel vehicles by 2040.

    Ford will become the largest automaker to purchase Landair, with the deal valued as much as $7.3 billion.

    Landair currently supplies about a third of Ford’s diesel fleet in Britain, with an estimated 1.3 million vehicles worldwide.

    Ford has struggled to make diesel vehicles in the U.S. for a decade as it focuses on developing its next-generation SUV and pickup, as well as expanding the number of diesel-powered passenger vehicles on the road.

    It also faces a backlog of more more than 10 million vehicles to meet emissions standards set by the U-K.

    Ford also said it would buy the Swedish company’s diesel plant in Gothenburg, Sweden.

    Volkswagen is the largest carmaker in the world, with more than 1.4 million vehicles.

    It is also building a diesel unit at its new Audi plant in Wuppertal, Germany, and has announced plans to invest more than $1 billion to build a new plant in the UK.

    The U.k. government said it approved the deal on Monday.

    Volkswagen and Landair previously agreed to take a joint stake in Landair.

    Volkswagen had previously announced it would merge its diesel units, which it will also continue to run, into a new company.

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