By Joanna Zuckerman Bernstein and Ben Klayman
MEXICO CITY/DETROIT (Reuters) - General Motors Co (GM.N) will build its next-generation Chevrolet Cruze small car in Mexico, the company said on Monday, as automakers look to expand there to take advantage of low labor costs and free trade agreements.
GM will invest $350 million to produce the Cruze at its plant in Coahuila, as part of the $5 billion investment in its Mexican plants announced last year.
GM also said it will continue manufacturing the model at its factory in Lordstown, Ohio. GM so far has identified only three plants globally 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 to build 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 labor costs and access to the U.S. market. Toyota <7203.T> is finalizing plans for its first passenger car assembly plant in Mexico, people familiar with the matter previously said. Volkswagen (VOWG_p.DE) recently announced a $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.
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 labor 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.
GM's plant in Coahuila currently makes the Chevrolet Sonic car and Captiva Sport SUV, and Cadillac SRX SUV.
(Reporting by Joanna Zuckerman Bernstein in Mexico City and Ben Klayman in Detroit; Editing by Tom Brown, Bernard Orr)