GM Investing $1 Billion In Brazil

BRASILIA, Brazil (AP) -- General Motors will invest $1 billion to develop two car models in Brazil, despite woes at the company's headquarters in the U.S., the company announced on Wednesday.

The bulk of the investment will go for production of new small-and mid-sized cars at the Gravatai plant in southern Brazil, said Jaime Ardila, president of GM's operations in Brazil and other Mercosur trade bloc nations.

"We'll begin development of the models now and the production will begin in 2012," Ardila said. "We'll have other models of the same family that we'll announce in the future."

Ardila, speaking after meeting with Brazil's President Luiz Inacio Lula da Silva, also said the cars would be sold in Brazil and other Mercosur countries, and said GM Brazil might later export them to other nations, such as South Africa.

The news of expansion in Latin America's biggest economy comes as General Motors Co. is emerging from bankruptcy protection in the United States as a private company majority owned by the U.S. government. The GM Brazil unit is financially independent from that in the U.S. and has nothing to do with the restructuring there, Ardila said.

The new vehicles are based on Brazilian engineering and design, "thus there is also no dependence on products" from the U.S., Ardila said.

The investment -- 50 percent will come straight from GM Brazil, with the rest financed by state-run banks -- would be the biggest GM has ever made in the country, where it has operated since 1925, Ardila said.

He said it is GM's first major investment anywhere since the global financial crisis took hold last year.

Ardila said GM's operations in South America will not be affected by the collapse of the parent company in the U.S. GM sales in Brazil hit a last year, with 580,000 vehicles sold. He forecast that number would increase to 600,000 this year.

Brazil's government has aided sales by slicing auto sales taxes and relaxing lending terms. The continued cutting of Brazil's key interest rate has also freed up commercial lending, giving more consumers the access to cash to buy big-ticket items like cars.

Ardila said that engineers and designers will spend the next 18 months working on the new models -- details of which he didn't disclose. By 2011, he said most of the work would be taking place at the Gravatai plant in Rio Grande do Sul state, which is looking to expand its annual production from 230,000 vehicles to 380,000 by 2012.

The project should create at least 1,000 new jobs.

Brazil's auto industry is dominated by Fiat SpA, Volkswagen AG, General Motors Corp. and Ford Motor Co.

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