GE plans $69 mln investment in Kentucky factory

* To build new style of hot water heater

* Will add 400 jobs

BOSTON, June 1 (Reuters) - General Electric Co (GE.N) plans to invest $69 million to retool its Kentucky appliance factory to make a new-style water heater the largest U.S. conglomerate says will use less than half the energy of current models.

The company, which has operations ranging from building jet engines to commercial lending, said on Monday it plans to add about 400 jobs in Louisville to produce the so-called "hybrid" water heaters.

The move, which comes a year after an unsuccessful effort by GE to sell or spin off its century-old appliance business, is a sign of its new commitment to the unit, said James Campbell, chief executive of GE's consumer and industrial arm.

"We've put this thing behind us and we're continuing to invest to make the business as competitive as we can," Campbell said in a phone interview. "This is a fairly significant investment; the company's got faith in the business to spend the money to get us into new product categories."

The "hybrid" water heaters will couple an electric heating element with a heat pump, which can transfer heat from the air around the appliance to the water within. Heat pumps are less effective in colder areas.

The union that represents GE workers at the Louisville facility agreed to a wage freeze through 2011 as part of negotiations to locate the jobs at that facility.

The Louisville plant today employs more than 4,000 people.

GE expects to begin production on the new style of water heater in 2011, and targets peak production of 300,000 units per year. They will carry a retail price of about $1,500, but Campbell declined to provide GE's revenue target for the product.

GE's appliance arm, which also makes refrigerators and washing machines, faces U.S. competitors including Whirlpool Corp (WHR.N). The division, which also includes GE's lighting arm, in 2008 earned $365 million on $11.74 billion in revenue.

The Fairfield, Connecticut-based company last year attempted to sell its appliance unit -- naming Asian rivals LG Electronics Inc (066570.KS) and Samsung Electronics Co Ltd (005930.KS) as well as China's Haier Group as possible bidders -- but reversed course as dealmaking ground to a near halt in the face of a slumping economy and a lockup in credit markets. (Reporting by Scott Malone, editing by Dave Zimmerman)