FILE PHOTO: A combination picture shows the logos of Opel and Peugeot car manufacturers at dealerships of the brands in Strasbourg, France, February 14, 2017. Image Credit: Reuters

PSA Group (has agreed to buy European rival Opel from General Motors in a deal valuing the business at 2.2 billion euros ($2.3 billion), the companies said on Monday, creating a new regional car giant to challenge market leader Volkswagen.

The maker of Peugeot and Citroen cars pledged to achieve 1.7 billion euros in cost savings from the acquisition by 2026 and lift the Opel business and its UK Vauxhall brand to a 6 percent operating margin in the same period.