UPDATE 1-General Motors to invest $2.7 bln in Brazil's Sao Paulo over five years

General Motors Co said on Tuesday it would invest 10 billion reais ($2.65 billion) in two of its Brazilian plants in Sao Paulo state over the next five years, reversing what the state's governor said was a previous plan to shut down the plants, potentially costing 65,000 jobs. Under the new plan, GM will invest in its Sao Caetano do Sul and Sao Jose dos Campos plants, the latter of which had been starved of investments in recent years.

The automaker is the sales leader in Brazil's market, the largest in South America, but had warned employees that it was dealing with heavy losses, adding that "sacrifices" would be necessary. "When we embarked on this path last December, we had a really serious problem, which was the future of our factories in Sao Paulo," GM's CEO for South America, Carlos Zarlenga, told a news conference on Tuesday. He added that he initially doubted there was any way to keep the factories open.

The news conference was hosted by Sao Paulo State Governor Joao Doria. While the amount pales compared with GM's most recent investment plan in Brazil in 2014, which totalled $4 billion, it does not include the automaker's plants elsewhere in the country. ($1 = 3.7765 reais) (Reporting by Marcelo Rochabrun in Sao Paulo Editing by Matthew Lewis)