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GM to make a small car with $500 million

General Motors Corp. said Thursday it will invest more than $500 million in the U.S. to build a new compact car that will compete in an era of high gasoline prices.
/ Source: The Associated Press

General Motors Corp. said Thursday it will invest more than $500 million in the U.S. to build a new compact car that will compete in an era of high gasoline prices.

Company Chairman and CEO Rick Wagoner announced the size of the investment Thursday at the Lordstown factory near Cleveland. The sprawling complex now makes the Chevrolet Cobalt and Pontiac G5 small cars.

GM announced in June that the Lordstown factory would be retooled to make the new Chevrolet Cruze compact.

The $500 million investment includes $350 million in Lordstown. The company also will build 1-liter to 1.4-liter four-cylinder gasoline engines for the Cruze at a new factory to be built in Flint, Michigan.

The Cruze will be launched in Europe and Asia next year. It will come to the U.S. in second half of 2010.

The new car is expected to get around 45 miles per gallon (5.2 liters per 100 kilometers) on the highway. The most efficient 2009 Cobalt or G5 with a manual transmission gets up to 37 mpg (6.3 liters per 100 kms), GM says.

"Our goal is for the Chevrolet Cruze to lead in fuel economy in this very competitive car segment," Wagoner said in a statement.

The investment in Lordstown, about 50 miles (80 kilometers) southeast of Cleveland, is good news for a region hit hard by the demise of the U.S. steel industry.

GM already is adding a third shift at the Lordstown complex to keep up with heavy demand for Cobalts.

Cobalt sales were up 16.4 percent through the first seven months of the year, while G5 sales were down about 1 percent.

Chevrolet North America Vice President Ed Peper said in a statement that GM can't make Cobalts quickly enough.

"Our dealers are asking for many more Cobalts than we can build," he said.

The Cobalt's success prompted GM to add the third production shift and 1,400 jobs — the largest hiring since Lordstown opened in 1966. The complex will employ about 4,300 hourly workers and roughly 300 salaried workers.

GM has released little information on the new Cruze, which officially will debut in October at the Paris Motor Show.

It will be about 15 feet (4.5-meter) long, almost identical to the Cobalt. But GM said the Cruze will make better use of its interior space, offering more room for five passengers and cargo.

Whether or when the Cobalt and G5 might cease production has yet to be determined, GM has said.