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GM Spending $500M On Compact Car Plants

General Motors plans to invest more than $500 million in the U.S. to build the new Chevrolet Cruze compact car that will compete in an era of high gasoline prices.

LORDSTOWN, Ohio (AP) -- 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 at the Lordstown factory near Youngstown. The sprawling complex now makes the Chevrolet Cobalt and Pontiac G5 small cars.

Wagoner showed off a full-size model of the Chevrolet Cruze, providing the first glimpse of the car that will be built in Ohio.

The sleek, four-door model features an arching roof-line with a body that's wider and longer than competing compacts. GM hopes it will be a style and engineering improvement over the Cobalt and G5, including better fuel mileage.

The announcement comes at a difficult time for GM and the U.S. auto industry. In July, GM said it will cut shifts at plants in Moraine, Ohio, and Shreveport, La., eliminating 1,760 jobs as it reduces vehicle production due to weak demand for trucks and sport utility vehicles.

Wagoner, while acknowledging the industry's struggles amid high gas prices, made Thursday's event a celebration for GM's strategic shift from larger vehicles to smaller cars.

"This is a challenging time for us in the industry," he told reporters after the event. "This is a significant commitment to a new vehicle that we think is going to be globally competitive right to the heart of where the market is going."

He said Cruze production will be strong at Lordstown when it begins in April 2010, but added "over the first couple of years we want to be realistic with what we can supply."

The company announced in June that the Lordstown factory would be retooled to make the Cruze. The company also will build 1.4-liter engines for the Cruze at a new factory to be built in Flint, Mich.

The Cruze will be launched in Europe and Asia next year, and be manufactured in those regions in addition to Lordstown, Wagoner said. The vehicle will come to the U.S. in second half of 2010.

The investment in Lordstown, about 50 miles 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. The additional 1,400 jobs is the largest hiring since Lordstown opened in 1966. The complex will employ about 4,300 hourly workers and roughly 300 salaried workers.

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 Cruze, which officially will debut in October at the Paris Motor Show, features a concave shoulder line and a two-tier grille, GM said. The interior features a twin-cockpit design first introduced in the Corvette.

It will be available in Europe with 16-valve, 1.6-liter and 1.8-liter engines featuring variable valve timing on both inlet and exhaust sides, the company said.

The Cruze will be about 15 feet 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.

Shares of GM shed 24 cents, or 2.4 percent, to $9.92 Thursday.

GM's U.S. sales were down about 16 percent for the first half of this year.

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