General Motors Corp. started production Monday of its two-mode gas-electric hybrid transmission systems that will debut in the 2008 Chevrolet Tahoe Hybrid and GMC Yukon Hybrid sport utility vehicles.

Built at the automaker's Baltimore Transmission plant, the hybrid system will help GM compete against Toyota Motor Corp., which sells hybrid versions of the Toyota Highlander and Lexus RX SUVs, and Ford Motor Co., which offers the Escape Hybrid SUV.

GM officials said it was the first hybrid transmission to be developed in the United States and noted that three-fourths of its content came from U.S.-based suppliers.

John Buttermore, GM Powertrain's vice-president of global manufacturing, said the hybrid systems were part of the company's efforts to offer more fuel-efficient vehicles powered by an assortment of energy sources, including ethanol, electricity and hydrogen.

``We view this as an extraordinary opportunity, a chance, in essence, to reinvent the auto industry through technology and innovation and ultimately take the automobile out of the environmental debate,'' Buttermore said.

The two-mode hybrid system, developed jointly by GM, BMW AG and the former DaimlerChrysler AG, uses a computer to choose from thousands of combinations of running on one electric motor, two electric motors, a combination of electric motors and the gasoline engine, or shutting down some of the gas engine's cylinders.

The vehicles, to be built at GM's plant in Arlington, Texas, are expected to have an overall fuel economy of about 21 miles per gallon (about nine kilometres per litre), the same as the city fuel economy of the 4-cylinder Toyota Camry. It will provide a 30 per cent increase in fuel economy compared with similar non-hybrid versions of the Tahoe and Yukon.

Pricing has not yet been announced for the new hybrids, which are expected to arrive at dealerships in December. Buttermore declined to give the expected production volumes, telling reporters that ``we're going to try to be flexible and adaptable and see where the market wants to take it.''

The Maryland plant, which received a US$118 million upgrade to produce the transmissions, also is scheduled to build hybrid systems for other hybrid vehicles next year, including the Cadillac Escalade SUV and the Chevrolet Silverado and GMC Sierra crew cab pickups.

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