(CNNMoney.com) — Ford Motor company said it will create up to 1,200 jobs in the distressed state of Michigan as it ramps up its engineering and manufacturing operations to produce more fuel-efficient cars.

Lured by state tax incentives, the automotive company announced Monday it plans to invest $850 million in new fuel-saving technologies between 2011 and 2013.

Ford’s (F, Fortune 500) stock closed 1.4% higher.

The funds would generate hundreds of new full-time positions in manufacturing and engineering operations in Michigan by 2013, according to a statement released by the company.

Approximately 900 of those jobs would be hourly positions in Ford’s Michigan manufacturing facilities, and the rest would be salaried positions in the engineering and manufacturing operations, the company said.

The unemployment rate in Michigan was 13% in September, the second highest in the nation, according to the Labor Department.

“We are pleased to work with state and local government leaders to find new ways to … invest in our people as well as Ford facilities, further improve our competitiveness and secure jobs in Michigan,” Mark Fields, Ford’s president of The Americas, said in a statement.

“Promoting investments in technologies, facilities and our workforce ultimately will help revitalize manufacturing in Michigan and help Ford compete with the best in the business worldwide,” Fields said.

The plan is awaiting approval by The Michigan Economic Development Council. Once approved, the funds will be allocated across a variety of plants including Van Dyke Transmission, Sterling Axle, Livonia Transmission and Dearborn Truck Plant.