A contract to this end has now been signed by the two companies.
The new company, which will be known as Rheinmetall MAN Military Vehicles GmbH (RMMV), will cover the entire range of armoured and unarmoured transport, command and role-specific vehicles for armed forces.
RMMV unites MAN's automotive expertise in commercial vehicle manufacture with Rheinmetall's technological know-how in the military field.
Rheinmetall will have a stake of 51 per cent and MAN 49 per cent in the new company, which will be headquartered in Munich.
The plan is still subject to approval from the competition authorities.
"With this new company we are combining the strong MAN and Rheinmetall brands and the complementary technological core competencies of the two partners to form a globally operating system provider, which will present one face to the military customer with the goal of improving its position in the world market," Dr Georg Pachta-Reyhofen, Chairman of the Executive Board of MAN Nutzfahrzeuge AG, said at the signing of the contract.
"The new company follows the trend towards the joint acquisition of logistical and tactical military vehicles, whose protective and mobility characteristics have become highly similar because of current operational conditions," Klaus Eberhardt, Chairman of the Executive Board of Rheinmetall AG, said.
"With their joint enterprise MAN and Rheinmetall are at the same time making an important contribution to the necessary consolidation of military vehicle systems at national and European levels."
The first step calls for the merging of the development and sales activities of the two companies in the military wheeled vehicle sector under the aegis of the new company, which takes over product and market responsibility.
The second contractually agreed step sees the two companies' production capacities at the plants in Kassel (Rheinmetall) and Vienna (MAN Nutzfahrzeuge) integrated into the joint company by the end of 2011.
In the initial phase, RMMV will have around 370 employees; when the second step has been completed this will increase to around 1,300 employees, and annual turnover will amount to more than one billion euros.