Buffalo, NY (WBEN) - General Motor's has done an about face, telling UAW officials and employees Thursday that they will not be putting a new $300 million engine line in at Tonawanda's Powertrain Division as once planned.

GM's decision to not pursue the new V-8 engine for it's Cadillac brands, is a casualty of tougher new fuel efficiency standards signed into law by President Bush last month.

"The CAFE (Coporate Average Fuel Economy) Standards that were just passed by Congress.. has put a crimp in a big engine like that," says UAW Asst. Regional Director Kevin Donovan.

"(With) oil prices that keep rising... they really didn't think they could sell that product in the volume that they were anticipating," Donovan said.

The engine line, first announced last January, was to have safeguarded 1,600 jobs at the plant. Last Spring the plant added a new line of GM diesel engines that add further stability to the plant, and could cushion the loss.

"This will basically effect 150 jobs, but with the attrition programs that will be rolled out by GM in the next couple weeks... those 150 will not be effected at all," Donovan said.

The plant will remain open, and talks about a replacement line have been held between plant officials and GM brass, Donovan said.

In December, the U.S. government approved by a wide margin the first increase in automobile fuel economy in 32 years. The energy bill, boosting mileage by 40 per cent to 35 miles a gallon.

The CAFE standards force each automaker to change their overall product mix. Expressed in mile per gallon numbers, it is the sales weighted average fuel economy of any manufacturer’s passenger cars or light trucks line.

In a dramatic shift to spur increased demand for non-fossil fuels, the bill also requires a six-fold increase in ethanol use to 136 billion litres a year by 2022, a boon to farmers. And it requires new energy-efficiency standards for an array of appliances, lighting, and commercial and government buildings