By deciding to build the small cars in the United States, GM is defying the industry’s conventional wisdom that small cars can only be profitably made in low labor cost countries such as Mexico, China, India or eastern Europe. The key is GM’s labor agreement with the UAW that allows up to 25% of any plant’s workers to be hired at a wage and benefit cost of $28 an hour, or about half of what veteran union workers receive.In addition to saving 1,200 jobs at Orion, GM will invest between $600 million and $800 million to equip the plant to build up to 160,000 small cars annually, beginning in 2011. The body panels and structural components will come from GM’s Pontiac stamping plant, preserving another 200 jobs.The plans fall under a tentative deal GM reached in April with the United Auto Workers. The union agreed to concessions that will allow GM to turn a profit on the vehicle, something that previously had been difficult in the U.S. with small cars because of relatively high labor costs. In return, GM agreed to build the model in the U.S. rather than China as originally planned.