MEXICO CITY (Reuters) - General Motors Co. is investing $540 million in an engine plant in central Mexico to produce two low-emission engine models.
Mexico's auto industry, a key driver of industrial activity, is closely tied to demand from the United States and has helped the domestic economy rebound from a deep recession. Auto production was up 50 percent for 2010 compared with 2009 while exports were up 52 percent in that period.
U.S., European and Asian automakers have increased investments and shifted more production into Mexico recently.
"This confirms with facts the confidence in Mexico and the certainty of one of the most important companies in the world that Mexico is a safe and productive place to invest," Mexican President Felipe Calderon said at an event in the central industrial hub of Toluca, where GM operates one of its five facilities in the country.
Rising drug violence has worried some foreign companies with operations in Mexico.
The U.S. automobile market bounced back in 2010 from a four-year slump, and a 50 percent surge in Mexican vehicle production helped speed the recovery of Latin America's second-biggest economy out of a deep recession.
The move by GM, flush with cash after its 2009 restructuring in bankruptcy, follows other investments in recent years by American, European and Asian automakers, who are seeking to produce more fuel-efficient models in Mexico.
GM and other U.S. automakers are readying a new generation of small cars to address a weakness in their product lineup that cost them sales when gas prices spiked in 2008.
The new engine production line is being built at a plant where GM shuttered production of gas-guzzling trucks during the recession, Calderon noted.