General Motors Corp. has abandoned plans to build a V-8 engine for luxury vehicles at a plant near Buffalo, blaming new federal mileage requirements and high Fuel prices cutting into consumer demand.The decision announced Thursday will affect 130 to 150 laid-off workers who would have been brought back to work on the dual overhead cam engine, GM Powertrain spokeswoman Sharon Basel said.Plans to retool the plant to build a new V-8 Duramax clean diesel engine for GM’s light duty pickup trucks are still on track, Basel said.Employees were told about the decision Thursday morning.”There are a couple of factors that have come into play over the course of the past year,” Basel said, citing the popularity of more fuel-efficient and high-feature V-6 engines with performance similar to the larger motors.”We’re seeing the demand for V-8 engines rapidly declining,” Basel said, “and then you combine that with the forces like rising fuel prices and the new CAFE legislation and that has caused us to go back and reevaluate our product portfolio.”Congress last month approved the first increase in automobile fuel economy in 32 years, boosting mileage by 40 percent to 35 miles per gallon.The automakers fought an increase in the federal fuel standard, known as CAFE, maintaining it would limit the range of vehicles consumers will have available in showrooms and threaten auto industry jobs.GM announced plans in January 2007 to begin producing the now-shelved V-8 engine in Tonawanda in 2009. Six months later, the plant, which employs 1,850 hourly and salaried workers, landed the Duramax clean diesel engine after an aggressive lobbying campaign by elected and union officials.Both announcements came after the Erie County Industrial Development Agency – hoping to improve Tonawanda’s chances of winning future engine lines – approved nearly $8 million in tax breaks for the plant in December 2006.”We were very concerned a year ago when we got the first engine, we needed to get some more work inside the plant,” Kevin Donovan, assistant Region 9 director of the United Auto Workers, told WIVB television on Thursday. “We went and talked to General Motors (nyse: GM – news – people ) and put some good competitive packages together that safeguarded the rest of the jobs that were inside the plant, along with all the other engines that were there.”In awarding the Duramax diesel engine, the automaker said it will invest $100 million in the 3.1 million-square-foot plant to produce the 4.5-liter, high-output diesel engine for the Chevrolet Silverado, GMC Sierra pickup and Hummer H2. Production is expected to begin in the fourth quarter of 2009.The Tonawanda plant ranked as the eighth most productive engine plant in North America in a May 2007 report by Troy, Mich.-based Harbour Consulting.Daniel Gundersen, upstate chairman of the Empire State Development Corp., held out hope Thursday the plant will attract a new product line to replace the lost V-8.”The GM plant here in Tonawanda remains one of the most efficient and productive plants in the U.S. with a skilled work force and modern equipment,” he said. News source: Forbes