General Motors plans to invest $500 million on its all-new global compact car, the Chevrolet Cruze, being built at its Lordstown, Ohio plant.  Later it will also be built in Europe and in the Asia Pacific for sales in the region.

Banking on the demand for small niche cars, the auto maker has increased production of compact cars after a drop in sales of its profitable pickup trucks and sport-utility vehicles due to high fuel prices.

Cruze is a four-door car with an arching roof line, extending from the steeply raked windshield to its sloping rear pillars and short rear deck. The car is wider and longer than most of the other cars in the segment, and has wheels at the outer edges of the bodywork.

General Motors chairman and CEO Rick Wagoner said the Cruze, designed and engineered by GM’s global teams, will make its European debut at the Paris Motor Show this October.

GM said it plannned to make the Cruze a leader in fuel economy, as it is expected to deliver 40-plus miles to the gallon.

Ed Peper, GMNA vice president of Chevrolet, spoke of GM’s strong position in delivering fuel-efficient vehicles that consumers want to buy. ”The Cruze will build on the already successful Chevrolet Cobalt, Cobalt XFE and Cobalt SS, all of which are nearly sold out in dealer showrooms,” Peper said. ”Our dealers are asking for many more Cobalts than we can build.”

The investment in Lordstown is one of several that have been announced at US plants in the past five years, adding up to over $2 billion total investment in Ohio and more than $20 billion in the United States.

“The Chevrolet Cruze epitomises the global nature of the automobile industry and General Motors’ commitment to deliver fuel efficient, high-quality products,” GM said in a statement. “Cruze is the result of a development process harnessing GM’s global design and engineering expertise. It is the first of a new family of compact Chevrolets that will continue the attention to quality, fuel efficiency, and strong value promise of the highly successful Malibu and all other vehicles under the Chevrolet brand.

Every governor of Ohio starting with James A. Rhodes in 1964 has committed the financial power of state government to General Motors Corp.’s Lordstown assembly complex to ensure that the world’s leading automaker doesn’t have an excuse to pull up stakes.

And for the 24 years since Rhodes participated in the ground breaking for the plant in Lordstown Village, that commitment has paid dividends. To be sure, there were times when it seemed that the odds were against the Mahoning Valley’s top employer, but whenever state government was asked to step forward, it did.

And so it was that Gov. Ted Strickland and Lt. Gov. Lee I. Fisher came to Lordstown on Thursday and joined General Motors’ chairman and chief executive officer, Rick Wagoner, other company officials and union leaders in an announcement that begins a new chapter in the history of the assembly plant.

The $80 million in incentives from the state has triggered a $350 million-plus investment by the company to build the Chevrolet Cruze, the all-new global compact car that will replace the highly successful Chevrolet Cobalt and the Pontiac G5, which went into production in 2004.

Strickland and Fisher let Wagoner know that the state stands ready to double its financial participation in the plant or another GM facility in Ohio if the CEO is willing to make a commitment for future products.

In public, at least, Wagoner refused to take the bait, but the governor and lieutenant governor met with him and other GM officials privately after the unveiling of a model of the Cruze. Ohio’s top political leaders made it clear that the offer wasn’t some public relations stunt.

Intense competition

That’s good news for the Valley, which certainly needs a partner in Columbus, given the intense competition for GM’s future investments.

Indeed, while there were many federal, state and local officials who attended the Cruze’s unveiling, two who were missed were former governors Bob Taft and George V. Voinovich.

In 2002, when the Lordstown plant was in competition with other facilities around the country for the Cobalt, Taft instructed his economic development team to make sure that the economic incentive package offered to GM was superior to any other from the states in the running.

Thus, when company officials came to the Valley to announce that the Cobalt and Pontiac G5 were ours, they let it be known that the active involvement of Taft administration was a major reason for their choosing Lordstown.

That choice resulted in a $1 billion investment by GM for the construction of a new paint shop and other improvements.

As for Voinovich, who was governor before Taft and is now Ohio’s senior U.S. senator, his decision to have the state build access roads off Interstate 80 to facilitate easy entry to and exit from the plant, especially for truck traffic, sent a strong signal to GM’s headquarters in Detroit: The state of Ohio will do whatever it takes to keep the Mahoning Valley in your long-term plans.

It is notable that Voinovich and Taft are Republicans, while this area is predominantly Democratic. Yet, their commitment to the future of the facility was unwavering.

Strickland and Fisher are Democrats who enjoy strong support in Mahoning, Trumbull and Columbiana counties. Their commitment can be taken for granted.

As part of its plans to make cars more consumer- friendly and suit their tastes best, General Motor Corp. plans to invest $500 million in the manufacturing of the new Chevrolet Cruze at its Ohio plant.

GM’s Ohio plant already is the assembly ground for the Chevy Cobalt and Pontiac G5. The production of the compact car is planned to begin sometime in 2010. However, it shall be unveiled at the Paris Motor Show, in October.

Slated to be launched in Europe and Asia Pacific next year, the Cruze will also have manufacturing plants in these regions of the world.

“Our goal for the Chevrolet Cruze is to lead in fuel economy in this very competitive car segment,” Chairman and CEO Rick Wagoner said in a statement.

The new compact car would be designed in a way to give competition to cars like Stalwarts. It is speculated that GM plans to launch 19 new cars and 18 out of these are going to be crossovers as people are opting for smaller cars, getting tired of SUVs and small trucks, despite the fact that bulk of GM’s profits come from the sale of SUVs and small trucks rather than cars.

Planned to replace the Chevrolet Cobalt, this small car would initially be launched in North America, relying mainly on the increased demand for small cars in this region.

Thanks to the increased gasoline prices the demand for heavier vehicles has taken a nose dip in the country, prompting GM to alter a whole car lineup, to continue making profit.

Already facing a liquidity crunch, it wasn’t good news for the auto maker company when shares fell 2.7% to $9.89.
Mr. Wagoner said Thursday that capital markets “have not opened up robustly” and are “moving in fits and starts.”
Let’s hope the small car does big wonders for the company to help it sail through the all time low phase, the US automobile industry is undergoing.