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GM to invest $100 million in New York parts plant

By Neale Gulley

ROCHESTER, New York (Reuters) - General Motors Co <GM.N> said on Tuesday it will invest $100 million in a New York parts plant that the company and union officials say was kept from closing because workers there agreed to "second-tier" wage levels designed to keep U.S. automakers competitive.

GM will make a new fuel injection product line at the Rochester plant, securing hundreds of jobs while also creating an additional 30 hourly jobs, New York Gov. Andrew Cuomo said. The plant currently employs 826 people.

GM's vice president for labor relations, Cathy Clegg, said the company has now announced investment of $1.1 billion at six North American plants to develop and produce the fuel-efficient "Gen V" small block engine that will be used primarily in full-sized trucks starting in the 2013 model year.

The new hires will boost to 675 the number of hourly wage workers at the Rochester plant, where most workers get the "second-tier" or "entry level" pay as low as $14.50 per hour -- about half the pay of veteran auto workers.

A two-tier wage system was instituted among the major U.S. automakers and the United Auto Workers union, mainly for new hires. Workers at the 72-year-old Rochester parts plant agreed to accept lower wages in 2007 when Delphi owned the plant, as part of that company's bankruptcy reorganization.

UAW Local 1097 President Dan Mahoney said the Rochester plant was almost closed in 2006. The Rochester plant opened in 1939 as a GM property, was later part of Delphi as it was spun off from GM, and was then taken back in 2009 by GM.

At its peak 20 years ago, Mahoney said, 6,000 people worked at the Rochester plant.

The UAW's current contract with GM, Ford Motor Co <F.N> and Chrysler Group LLC expires in September and the future of two-tier wages is expected to be a key issue in upcoming talks.

Joe Ashton, UAW's vice president for GM relations, said it is too early to talk about the fate of two-tier pay. But he and other UAW executives have said that it is a key component to allowing U.S. automakers to compete with foreign automakers that have lower wage and benefit costs.

"I think the thing that gets lost about second tier is that second tier eventually becomes first tier," Ashton said.

GM's new chief financial officer, Dan Ammann, told analysts last week the company would agree to variable labor cost increases, like profit-linked bonuses for workers, to avoid larger, structural contract cost increases like health care.

Ashton declined to comment, saying he will save that for the negotiations.

GM said the jobs in Rochester were kept from moving outside the United States by a combination of the second-tier wages and a $3 million capital grant and $1.82 million in jobs program benefits from New York.

(Additional reporting by Ben Klayman in Detroit; Editing by Derek Caney, Bernie Woodall and Gerald E. McCormick)

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