GM to build compact cars; UAW OKs contract

DETROIT -- The reformation of General Motors Corp. is in high gear.

The automaker said Friday that it plans to reopen a closed U.S. factory to build subcompact cars that will be the smallest vehicles GM has ever produced here. An element of the company's shift from sport utility vehicles to more efficient small cars, the move comes as GM prepares to announce the fate of the poster child for gas guzzlers, the Hummer brand.

Meanwhile, as expected, the United Auto Workers ratified a package of concessions designed to reduce the automaker's labor costs.

In Germany, the government and GM agreed on the framework of a deal for Magna International Inc. to take a majority stake in GM's Opel unit, a person briefed on the negotiations said.

With an expected Chapter 11 filing looming, GM's shares sunk below $1. The stock is expected to become worthless when GM reorganizes in bankruptcy court. GM's filing for bankruptcy protection is expected Monday, when GM also plans to announce 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 those plants. The person, who requested anonymity because of the sensitive nature of the plans, said GM has not determined which plant will get the new cars.

The retooled factory will be able to build 160,000 cars per year, GM said. It would create 1,200 jobs, the person said, offsetting some of the 21,000 that will be lost when GM closes the 14 factories by the end of next year.

The move to build the subcompact in the U.S. follows a firestorm caused by GM's plans to produce up to 51,000 subcompacts per year in China and ship them to the U.S. starting in 2011, disclosed in documents submitted to Congress.

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.

On Thursday, UAW 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.

On Friday, Gettelfinger said at a news conference that 74 percent of GM's 54,000 U.S. production and skilled-trade workers voted in favor of the deal. Reaching a deal with the union was one of the conditions imposed on GM by the Obama administration's auto task force. Originally meant to help keep the automaker out of bankruptcy court, bankruptcy experts say having the labor agreement in place will help move the process through court more quickly.

The UAW says the cuts will save GM $1.2 billion to $1.3 billion a year.

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.

In Berlin, negotiators were working out the final details of the Opel deal and an announcement could come within hours, said the person familiar with the negotiations, who did not want to be identified because talks had not yet finished.

Magna would provide short-term financing to become the preferred negotiating partner for Opel. The German government would put up a euro1.5 billion ($2.1 billion) bridge loan that would be repaid when the deal is closed.

Germany is looking for an agreement that will shield Opel -- which employs 25,000 people in Germany, nearly half GM Europe's work force -- from a looming GM bankruptcy court filing in the U.S. and extensive restructuring.

The government wants to make it legally independent under a trustee so that any taxpayer assistance does not go to the U.S., then would provide bridge financing while Opel looks for a new, permanent owner.