''The two-mode system innovations provide performance and fuel economy improvements at highway speeds and better trailer towing ability,'' Stephens said. ''Packaging is more efficient than today's single mode designs as the system's compact and powerful electric motors are designed to fit within the approximate space of a conventional automatic transmission.''

Stephens described the two-mode design as ''the optimal merging of full hybrid and state-of-the-art automatic transmission technologies. Together we will jointly develop what is essentially an electrically variable transmission with two hybrid drive modes.''

This system will reduce fuel consumption at highway speeds much more effectively than available single mode systems, Stephens said, and achieve at least a 25 percent improvement in composite fuel economy in full-size truck applications.

''In the near term,'' Stephens added, ''GM will also continue to expand its offerings of six-speed transmissions and engines equipped with advanced technologies such as variable valve timing and Displacement on Demand.''

The two firms have signed a non-binding ''memorandum of understanding,'' but intend to enter into a definitive agreement in early 2005.