General Motors on Friday reportedly chose its Ruesselsheim, Germany, plant to build mid-size cars for Europe over its plant in Sweden as it strives to cut costs and head off bruising competition.

The Associated Press (AP) reported that the automaker had said that only one of its European plants would produce the next generation of midsize Opels and Saabs, currently made at both Ruesselsheim and the Saab plant in Trollhaettan, Sweden.

GM reportedly said it based the decision on factors including labour costs, plant efficiency, logistics and currency issues.

"The study revealed that the best business case for this product allocation is the Ruesselsheim plant, which will be able to substantially improve its productivity," GM's European subsidiary, Adam Opel AG, said in a statement cited by the Associated Press.

"Both facilities put their best foot forward," Fritz Henderson, chairman of GM Europe reportedly said. "The business case over time for the Ruesselsheim facility was approximately €200 million ($US262 million) more cost effective than that of the Trollhaettan facility."

AP noted that Ruesselsheim is GM's biggest plant in Europe, with some 20,000 workers. The company has said it plans to cut 2,700 jobs from the plant as part of restructuring its European operations.

The news agency added that, last year, GM Europe announced it would cut as many as 12,000 jobs in Europe, where it is struggling to end years of losses amid fierce competition and weak demand. GM reportedly said 15% of management jobs in Europe would be eliminated as part of the programme, which aims to produce cost savings of €500 million ($US665 million) a year.

According to the Associated Press, the Trollhaettan plant employs more than 6,000 workers and produces more than 100,000 cars annually. More than 500 jobs, including 250 on the manufacturing line and another 250 in research and development, are to be cut by the end of 2005.

Details of a long-sought deal with workers at the plant, including a wage freeze and reducing benefits, were expected to be announced later on Friday, AP said.

AP noted that since General Motors acquired a stake in Saab Automobile AB in 1990, the automaker has posted profits just twice - GM bought Saab outright in 2000.

According to the Associated Press, General Motors for years let its regional divisions design and build cars independently but is now seeking more shared development and parts.

The mid-size Epsilon platform, to be built at Ruesselsheim from 2008, can serve as the basis for either an Opel Vectra or a Saab 9-3, the report noted.

GM reportedly said it was still committed to production at Trollhaettan. In addition to a new mid-sized Cadillac built for the European market, the company also plans to keep producing other Saab models at the plant at least until the end of 2010 and would expand the Saab line to include an unspecified new "crossover" vehicle.

"Furthermore, we will make every attempt to allocate additional future products to this facility," Carl-Peter Forster, president of GM Europe, said, according to the report.

Of Trollhaettan's 53,000 residents, nearly 6,000 work for Saab, the Associated Press added.