Peugeot to buy Opel, creating Europe's number 2 carmaker

Opel CEO Karl-Thomas Neumann presents the new Opel Ampera-e electric car at the Paris Auto Show, on Sept. 29, 2016. (AP / Christophe Ena)

PARIS - General Motors Co. is selling its loss-making European car business - including Germany's Opel and British brand Vauxhall - to French automaker PSA group.

The 2.2 billion euro ($2.33 billion) deal announced Monday in Paris by GM and PSA - maker of Peugeot and Citroen cars - will realign the industry and create Europe's No. 2 automaker after Volkswagen. The combined company could make 5 million cars a year.

PSA will join with French bank BNP Paribas in the purchase, which foresees taking over 12 manufacturing facilities that employ about 40,000 people, according to a joint statement by the companies.

Amid concerns about job losses in multiple countries, PSA CEO Carlos Tavares promised to keep existing GM commitments to workers.

GM will keep its manufacturing centre in Turin, Italy. GM and PSA, which have had joint activities in the past, will continue to collaborate on electric car technologies and maintain existing supply agreements on some Buick models.

The purchase marks a major turnaround for PSA, bailed out just three years ago by Chinese investors and the French state. CEO Tavares hopes to parlay his success at PSA to similar savings at Opel, cutting costs through scale and better use of factory capacity.

The deal suggests GM chief Mary Barra has decided profits are more important than market share. GM has not turned a full-year profit in Europe since 1999.

"For GM, this represents another major step in the ongoing work that is driving our improved performance and accelerating our momentum," General Motors Co. Chairman and CEO Mary Barra said in the statement.

The deal, subject to regulatory approval, is expected to be completed at the end of this year.

The move would give PSA access to technology and a larger scale to spread out engineering and other costs. The companies said they expect annual savings of 1.7 billion euros by 2026.

The price for Opel seems relatively small because of a big pension contribution for Opel's underfunded plan.