LORDSTOWN, Ohio — General Motors Corp. today gave the first public peek at the design of the Chevrolet Cruze compact car as it announced plans to invest more than $500 million in the United States to build the vehicle.
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GM plans to officially unveil the Cruze, which is being built on GM’s global compact car architecture, at the Paris auto show next month.

GM Chairman and CEO Rick Wagoner said more than $350 million of the money being spent on the Cruze program will be spent in Lordstown.

“The Chevrolet Cruze was designed and engineered by our global teams in Europe and Asia Pacific and will be manufactured in those regions in addition to the assembly plant here in Lordstown, Ohio,” Wagoner said in a statement released in advance of an event at the small-car assembly plant. “Our goal for the Chevrolet Cruze is to lead in fuel economy in this very competitive car segment.”

GM is working to increase production of its small and mid-size cars in response to a rapid shift in consumer demand away from large trucks to more fuel-efficient vehicles.

CHICAGO (Reuters) - Navistar International Corp (NAV.N: Quote, Profile, Research, Stock Buzz) said on Wednesday a tentative agreement struck late last year to buy General Motors Corp’s (GM.N: Quote, Profile, Research, Stock Buzz) medium-duty truck business had expired without a deal being reached.

Citing “significant marketplace and economic changes” that have taken place since the memorandum of understanding was signed, the truck and engine maker said the companies decided not to renew the pact, which was seen as a way for Navistar to extend its medium-duty market dominance and for GM to raise cash.

The breakdown comes as GM struggles to restructure by slashing production of slow-selling trucks, cutting billions of dollars in costs and boosting production of more fuel-efficient vehicles — a wrenching turnabout that requires the cooperation of its major union, the United Auto Workers.

Warrenville, Illinois-based Navistar made it clear from the start that it planned to move production away from the Flint, Michigan, plant where hundreds of UAW workers currently assemble GM’s medium-duty trucks.

The Flint Journal newspaper, quoting a UAW official, said the sale collapsed because GM was unable to keep a commitment it made to the union to bring replacement work to the truck plant once Navistar moved production out. GM had planned to move production of a super-heavy-duty pickup to Flint.

But with gasoline prices surging, demand for full-size pickup trucks has declined sharply and prompted all the leading Detroit automakers to cut production of the vehicles.

Henry Kirn, an analyst at UBS Investment Research who covers Navistar, said the downturn in the North American medium-duty truck market, where industry-wide orders are down 20 percent this year as a weak economy hits freight volumes and trucker profits, probably contributed to the deal’s demise.

Navistar said on Wednesday that while GM was continuing to review strategic options for the medium-duty truck business, in a process that included continued talks with Navistar, the Detroit automaker would continue to run the business, including providing sales, service and marketing support to GM dealers.

“We’ve agreed to not renew the (memorandum), but we’re continuing to dialogue with General Motors,” Navistar spokesman Roy Wiley told Reuters.

When the divestiture was first announced last December, it was seen as part of GM’s turnaround, as the company tried to focus more on its core business of making passenger vehicles.

For Navistar, which already produces trucks in the medium-duty market, the deal would have provided additional scale and permitted the company to run its existing factories more efficiently.

Some analysts thought it could add as much as 50 cents a year to Navistar’s earnings per share, which analysts expect to be $4.74 this fiscal year, according to the average on Reuters Estimates.

In a note to investors, Bear Stearns analyst Ann Duignan said the announcement put more pressure on Navistar to grow its non-U.S. businesses and might force it to close some North American plants as it battles the deteriorating truck market.

She called the GM pact expiring “an incremental longer-term negative” for Navistar, especially given its already troubled relationship with GM rival Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz).

Navistar produces engines for Ford’s diesel-powered Super-Duty trucks and vans. But the two companies have become locked in a prolonged legal battle centered on the development of next-generation Ford F-150 pickup trucks.

Neither GM nor the UAW were immediately available for comment.

(Additional reporting by Poornima Gupta; Editing by Braden Reddall)