Build of a Freestyle job fails after the last build step with the following error:

FATAL: Java heap space
java.lang.OutOfMemoryError: Java heap space
at java.lang.String.<init>(String.java:841)
at java.lang.String.substring(String.java:2692)
at org.jvnet.winp.WinProcess.parseCmdLineAndEnvVars(WinProcess.java:177)
at org.jvnet.winp.WinProcess.getEnvironmentVariables(WinProcess.java:146)
at hudson.util.ProcessTree$WindowsOSProcess.getEnvironmentVariables2(ProcessTree.java:624)
at hudson.util.ProcessTree$WindowsOSProcess.hasMatchingEnvVars2(ProcessTree.java:636)
at hudson.util.ProcessTree$WindowsOSProcess.access$700(ProcessTree.java:525)
at hudson.util.ProcessTree$Windows.hasMatchingEnvVars(ProcessTree.java:713)
at hudson.util.ProcessTree$Windows.killAll(ProcessTree.java:688)
at hudson.Launcher$LocalLauncher.kill(Launcher.java:1015)
at hudson.model.AbstractBuild$AbstractBuildExecution.run(AbstractBuild.java:525)
at hudson.model.Run.execute(Run.java:1906)
at hudson.model.FreeStyleBuild.run(FreeStyleBuild.java:43)
at hudson.model.ResourceController.execute(ResourceController.java:97)
at hudson.model.Executor.run(Executor.java:429)
Finished: FAILURE

This happens even with -Xmx1024m in jenkins.xml and simple Execute Windows batch command build steps with just some echo command