MEXICO CITY, March 24 — General Motors Co will build its next-generation Chevrolet Cruze small car in Mexico, the company said yesterday, as automakers look to expand there to take advantage of low labour costs and free trade agreements. GM will invest US$350 million (RM1.28 billion) to produce the Cruze at its plant in Coahuila, as part of the US$5 billion investment in its Mexican plants announced last year.

GM will continue manufacturing the model in Lordstown, Ohio. GM so far has identified only three plants that will make the next-generation Cruze, including in China.

A GM spokesman in the United States said the company's assembly plant in Gunsan, South Korea, will continue building the current Cruze model to meet demand in domestic and export markets. However, as part of a new wage deal last summer, GM agreed to build the next-generation Cruze in Korea starting in 2017, according to a GM proposal seen then by Reuters.

Automakers are looking to move to Mexico for its low labour costs and access to the US market. Toyota is finalising plans for its first passenger car assembly plant in Mexico, people familiar with the matter previously said. Volkswagen recently announced a US$1 billion investment in its Puebla plant.

It is the first time the Cruze will be made in Mexico, a GM spokeswoman in Mexico said, and production will be mainly for the domestic market. The Cruze is currently imported to Mexico from GM's plant in South Korea, she said.

In 2014, 7,870 Cruzes were sold in Mexico, down nearly 15 per cent from the year before, according to data from the Mexican Association of Automobile Distributors and the Mexican Automotive Industry Association.

GM has encountered tensions with its South Korean workers.

In April 2013, then GM CEO Dan Akerson angered union workers in Korea ahead of annual labour talks when he warned the automaker could shift operations from South Korea in the longer term. Union activists in South Korea in the past have threatened "a war" if output was shifted from their plants.

The GM spokesman declined to say whether added Cruze production in Mexico meant that the Coahuila plant's capacity would expand or was simply shifting among models it builds.

Eleven plants globally make the current Cruze model but some, including a plant in Australia where GM is shutting down assembly operations, will not build the next generation model, he said. — Reuters