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GM confirms plans to build compact cars in US

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By TOM KRISHER, AP Auto Writer Tom Krisher, Ap Auto Writer – 2 hrs 44 mins ago

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DETROIT – General Motors Corp. said Friday that it plans to reopen a shuttered U.S. factory to build subcompact cars that will be the smallest vehicles GM has ever produced here.

The company said in a written statement that the retooled factory will be able to build 160,000 cars per year. The automaker did not say which factory would be selected or which models it will build.

GM, which is expected to file for Chapter 11 bankruptcy protection Monday, also plans to announce then that it will close 14 more factories, including four assembly plants.

A person briefed on GM's plans said the small cars would be built at one of the plants to be announced Monday. The person, who requested anonymity because of the sensitive nature of the plans, said GM has not determined which plant will get the new vehicles.

The reopened factory, he said, would create 1,200 jobs, offsetting some of the 21,000 that will be lost when GM closes the 14 factories by the end of next year.

The automaker had said in documents submitted to Congress that it planned to produce up to 51,000 subcompacts per year in China and ship them to the U.S. starting in 2011, when GM plans to start selling the Chevrolet Spark here. The three-door hatchback with a 1.2-liter turbocharged engine is about the size of a Honda Fit or Toyota Yaris and is set to go on sale in Europe next year.

But in an interview with The Associated Press on Thursday, United Auto Workers President Ron Gettelfinger said GM will not import the cars from China and had agreed as part of a concession deal to build them in the U.S.

"Small cars represent one of the fastest-growing segments in both the U.S. and around the world," GM CEO Fritz Henderson said in the statement. "We believe this car will be a winner with our current and future customers in the U.S."

Henderson said the UAW concessions ensure GM's manufacturing competitiveness in the U.S.

GM already builds the compact Chevrolet Cobalt and Pontiac G5 at a plant in Lordstown, Ohio, and it plans to retool that plant to start making a new small car, the Chevrolet Cruze, next year. It also jointly manufactures the Pontiac Vibe, a rebadged Toyota Matrix, at a factory in Fremont, Calif.

A summary of a concession deal between the UAW and GM deal says an innovative labor agreement is needed for the company to produce small cars in the U.S. But Gettelfinger said that deal is near completion.

"I think basically we're there," he said. "There may have to be a few minor tweaks. The agreement that's in place here is competitive."

GM's plan to make the Spark in China and ship it to the U.S. drew criticism from the UAW and some members of Congress as it was negotiating the concession agreement. The plan was a political problem for the company, with the UAW saying it was wrong to take U.S. taxpayer loans and then ship jobs overseas.

GM has received $19.4 billion in federal loans and likely will get another $30 billion from the U.S. government as it makes its way through the bankruptcy court process. The company faces a government-imposed Monday deadline to complete restructuring, but all signs point to Chapter 11.

The person briefed on GM's plans said the company made the decision to build the small cars in the U.S. with the blessing of the government's auto task force.

Although GM had planned to import the cars, the cost-cutting UAW agreement and new fuel economy standards that require the U.S. new vehicle to average 35.5 miles per gallon changed the equation and made it a favorable business proposition, the person said.

GM would become the first automaker to make subcompact "B-segment" cars in the U.S., the person said.

GM now imports the Chevrolet Aveo subcompact from South Korea.

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