The French company that owns Peugeot and Citroen has struck a 2.2bn euro (£1.9bn) deal to buy General Motors’ European unit, including Vauxhall.
GM Europe has not made a profit since 1999 and the deal has raised fears about job losses at Vauxhall.
The UK factories at Ellesmere Port and Luton employ about 4,500 people.
With GM’s Opel and Vauxhall operations, PSA Group would become the second largest carmaker in Europe, behind Volkswagen.
In a statement, Carlos Tavares, chairman of PSA’s managing board, said: “We are confident that the Opel/Vauxhall turnaround will significantly accelerate with our support, while respecting the commitments made by GM to the Opel/Vauxhall employees.”
GM chairman and chief executive Mary Barra said it was a difficult decision to sell Opel and Vauxhall, and insisted the business would have broken even in 2016 had it not been for the UK’s decision to leave the European Union, which caused a sharp drop in the value of the pound.
PSA Group says it will cut costs to increase profits, which has stoked concerns for more than 4,000 Vauxhall jobs in the UK.
The new owners met government and unions last week and provided assurance that existing production commitments would be honoured at Ellesmere Port till 2020 and Luton for some years beyond that.
However, it is generally accepted that the 24 factories the combined company will have in Europe is too many.
The deal is an exit from Europe for GM which has lost billions here since the turn of the millennium. It will allow them to focus on its home market of the US and its expanding operations in China.
PSA has said many countries are reluctant to buy French cars and the Opel brand will help them expand into new markets.
The chancellor will have extra motivation to be supportive of the car industry when he delivers Wednesday’s Budget. He is expected to announce investment in skills, research and development around electric car technology in which PSA has so far lagged behind its rivals.
The deal includes PSA buying GM Europe’s financial operations for 900m euros in a joint deal with bank BNP Paribas.
PSA said it would return Opel and its Vauxhall brand to profit, and expected to make savings of £1.47bn per year by 2026, with most of the cuts made by 2020.
Since the two firms announced they were in talks on 14 February, they have met ministers and union officials to address concerns about potential job cuts.
Ahead of the announcement, the Unite union said that Vauxhall staff at plants at Luton and Ellesmere Port had endured a “nerve-wracking” few weeks.
The two operations employ around 4,500 workers.
Len McCluskey, general secretary of Unite, said while initial discussions with the PSA Group had been “relatively positive” the union’s priority was to “ensure a long-term future for our plants and the tens of thousands of workers depending on them”.
“We will also be urging the government to stay at the table, just as the French and German governments do, to provide full support for our auto workers through this deeply unsettling time.”
Thousands more workers are involved in Vauxhall’s showrooms and supply chain.
Prof Peter Wells of Cardiff Business School said jobs were likely to go since PSA already had overcapacity across its European plants.
“PSA’s Carlos Tavares has targeted savings of $2bn per annum so something has got to give,” he said.
“PSA will be inheriting quite a big mess, and out of that mess they are going to have to make something that is viable going forward.”
Ian Lucas, MP for Wrexham, whose constituency is close to Vauxhall’s Ellesmere Port plant, said “this is a very difficult day, especially if you work at Vauxhall”.
“In the next few years we’ve really got to make the case for Ellesmere Port and for more investment in the UK car industry.”