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PSA has announced a €2.2bn deal to buy General Motors’ lossmaking Opel division in a move that will make the Peugeot and Citroën owner the second-largest carmaker in Europe.

The deal will see GM finally cutting ties with Europe after a decade of losses in the region. PSA, which only three years ago was on the brink of collapse, is hoping that the acquisition will help it build on its recovery, adding much needed scale to its operations.

“We are confident that the Opel/Vauxhall turnaround will significantly accelerate with our support,” said Carlos Tavares, the PSA chief executive. “Having already created together winning products for the European market, we know that Opel/Vauxhall is the right partner.”

The agreement comes after months of negotiations between the two carmakers that have occasionally stumbled over the issue of Opel’s pension deficit and the ability of PSA to use GM’s electric car technology.

The combination is expected to generate annual savings of €1.7bn by 2026, with Opel generating an operating profit margin of 2 per cent by 2020 and 6 per cent by 2026, GM and PSA said in a joint statement on Monday.

Exiting Opel will lead to a non-cash charge of $4bn to $4.5bn for GM. The deal will continue efforts to shed underperforming assets and will free up about $2bn in cash to use for share buybacks, according to the statement.

The deal includes all of Opel/Vauxhall’s automotive operations, comprised of Opel and Vauxhall brands, six assembly and five component-manufacturing facilities and one engineering centre. This represents 40,000 employees, a company statement said. GM is to retain its engineering centre in Torino, Italy.

Opel/Vauxhall will continue to benefit from intellectual property licenses from GM until its vehicles progressively convert to PSA platforms over the coming years.

GM and PSA said they would continue to collaborate in the further deployment of electrification technologies and existing supply agreements for Holden and certain Buick models will continue, and PSA may potentially source long-term supply of fuel cell systems from the GM/Honda joint venture.

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