By Jethro Mullen and Peter Valdes-Dapena

HONG KONG (CNNMoney) -- General Motors has reached a deal to sell its money-losing European operations to the French maker of Peugeot and Citroen cars.

The agreement announced early Monday will create a new European autos giant, bringing the Opel and Vauxhall brands under the control of France's PSA.

GM is also selling its European financial arm to PSA and French bank BNP Paribas. The combined value of the deals is about $2.3 billion.

The agreement removes a financial headache for GM -- Germany's Opel and Britain's Vauxhall have lost $18 billion over the last 16 years. It will also make PSA Europe's second biggest carmaker after Volkswagen.

But it raises questions about the fate of thousands of jobs in Europe, particularly in the U.K., where Vauxhall's plants may find it even harder to compete once the country leaves the European Union.

Savings = job cuts?

Brexit could lead to trade barriers between the U.K. and EU, disrupting supply chains, pushing up the cost of components and raising the price of cars.

GM has 38,000 European employees, with more than 18,000 Opel workers in Germany and 4,300 Vauxhall employees in the U.K.

The companies said they expect the combination of Opel and Vauxhall with Peugeot and Citroen to enable cost savings in manufacturing, purchasing and research and development.

Those savings are expected to reach €1.7 billion ($1.8 billion) a year by 2026, with a "significant part" delivered by 2020, they said.

PSA shares trading in Europe advanced by 3% following the announcement.

PSA has recently turned around its own flagging fortunes in Europe. With the help of a big investment in 2014 from China's Dongfeng Motors and the French government, it has gone from near-bankruptcy to large profits.

CEO Carlos Tavares did not say exactly how he plans to turn Opel and Vauxhall into a profitable business.

Closing entire factories would be "a simplistic approach," Tavares said at a news conference. But he also warned that future plans would depend on workers and managers improving the efficiency and quality of their plants.

"People understand that the only thing that really protects them is to be at the right level of performance," he said.

Len McCluskey, leader of British labor union Unite, said he was determined to "convince the new boss ... that it makes sense for him to continue to build in Britain."

Brexit risk?

But McCluskey also said the U.K. government needs to defend jobs by negotiating a Brexit deal that will provide continued access to Europe's unified trading market.

"We need every assistance from the government to give this sector a fighting chance," the union leader said.

GM President Don Amman said he wanted to sell because diverging consumer tastes and government regulations meant that vehicles produced for the European market would bear little resemblance to models GM was selling elsewhere.

GM will retain most of Opel and Vauxhall's pension commitments. The U.S. automaker will, however, pay PSA €3 billion ($3.2 billion) to offload some smaller pension funds.