GM to build $370 million engine plant

General Motors Corp. said Thursday it will build a new factory in Flint to make four-cylinder engines for the Chevrolet Volt rechargeable electric car and other models.

GM Chairman and Chief Executive Rick Wagoner said the new plant will build a 1.4-liter four-cylinder engine that will extend the range of the Volt, and a turbocharged version that will power the Chevrolet Cruze, a new compact car to be built in Lordstown, Ohio.

"This will be one of the places. You will be one of the teams that help GM lead into our second century," Wagoner told workers and government officials gathered for the announcement.

Production at the new $370 million plant will begin in 2010, and both cars are slated to go on sale in the same year.

Workers at the nearby Flint Engine North plant, which GM (GM, Fortune 500) is in the process of closing, said the announcement is good news for an area hard hit by auto job losses.

Although GM said the new plant won't create any new jobs, it will retain about 300 hourly positions, and workers said they are hopeful the new plant will create more employment in the industrial city about 50 miles northwest of Detroit.

"This also means that there's a future for our youth in this area," worker Jean Adams-Anderson said.

The state of Michigan on Tuesday approved $132.5 million in tax incentives for the automaker to spend $838 million on the new plant and to upgrade four other facilities, including the Detroit-Hamtramck assembly plant where the Volt will be built.

The Flint investment includes the 552,000-square-foot plant as well as machinery and other equipment. GM says it will invest another $21 million in tooling for its suppliers to support the new Flint factory.

The new plant will double its global production of GM's small four-cylinder engines by 2011, with more than half the increase going into North America.

The factory, GM said, will have 300 flexible work stations that will allow the company to build different four-cylinder engines without retooling.

GM's U.S. sales are down 18% so far this year due to a declining market and high gasoline prices that have caused a dramatic shift away from trucks and sport utility vehicles to smaller, more efficient cars.

The new plant will help GM roll out new models designed to adjust to the shift, which GM and other automakers say is permanent.

The struggling automaker has lost $57.5 billion in the past 18 months, including $15.5 billion in the second quarter. Its U.S. market share has fallen to about 23% this year from a peak of nearly 51% in 1962.

The company is banking on the much-ballyhooed Volt to be its car of the future, although it conceded this week that the Volt won't operate exactly as advertised.

GM initially said the Volt would be able to run 40 miles on its lithium-ion batteries, with a small internal combustion engine recharging the batteries to extend the range hundreds of miles. A top executive said the same thing as recently as last week.

But company spokesman Rob Peterson said Wednesday that engineers changed the design so the Volt engine will power a generator that would run the electric motor after the batteries are depleted. A small amount of power from the generator will recharge the batteries, but most will be used to directly run the car, he said.

He said bypassing the batteries is more efficient, and GM did not intend to deceive people by maintaining that he motor would only be used to recharge the batteries.

"At the end of the day, to the consumer, the vehicle will operate much the same way," he said.