GM to build Opel SUV and invest 500 million euros in European engines

General Motors (GM.N) will build a sports utility vehicle (SUV) at the Opel factory in Ruesselsheim, Germany, and invest 500 million euros ($626 million) in engine production in Europe, Chief Executive Mary Barra said on Thursday.

The U.S. carmaker had said in March that it will make two additonal vehicles at Ruesselsheim, including a Buick-branded vehicle, destined for export to the United States as the company seeks to intertwine the Opel and Buick ranges more closely to share development costs. [ID:nL5N0MP1XB]

"This SUV will become a second flagship next to the Insignia," Barra said in a statement, referring to Opel's premium sedan.

The decision to invest 500 million euros to upgrade production for fuel-efficient engines comes on top of the 245 million euros pledged in March to bring a new model to Ruesselsheim and the 4 billion euros promised last year to overhaul Opel's ageing range as it chases a targeted 8 percent of the European market.

Auto industry association ACEA says that Opel and sister brand Vauxhall's market share was 6.9 percent in Western Europe between January and October.

Thursday's announcement was welcomed by labour union IG Metall, representing workers who have vehemently opposed some of GM's decisions to downsize operations in Europe.

"The example of Opel shows that IG Metall knows how to combine securing industrial jobs with sustainable growth," Wolfgang Schaefer-Klug, head of Opel's worker council said in a statement.

In February Opel signed a collective labour agreement with employees at its German factories in Ruesselsheim, Kaiserslautern and Eisenach, in an accord that includes a job protection guarantee until 2018.

Opel employs about 3,300 workers at Ruesselsheim, where the Insignia and Astra models are built.

GM said it would invest the 500 million euros in engine production at the Kaiserslautern and Ruesselsheim Opel plants as well as the GM powertrain factory in Tychy, Poland.