GM to invest $500 million in new compact

DETROIT, Aug. 22 (UPI) -- Auto giant General Motors Corp. is preparing to invest $500 million in a new compact car, slated for production in Lordstown, Ohio, the company said.

The Chevy Cruz is one of the company's answers to consumer demand for fuel-efficient vehicles and will reportedly run 45 miles on a gallon of gasoline, The Detroit News reported Friday.

The company plans to spend $150 million on development and $350 million on its Lordstown factory, the News reported.

GM lost $15.5 billion in the second quarter of 2008 with customers buffeted by rising gas prices and a weak economy, the report said.

Small cars have been less profitable for U.S. automakers than trucks and SUVs, but GM Chief Executive Officer Rick Wagoner said a new contract with the United Auto Workers union should help.

"Consumers are willing to pay a fair price for a good car. And (the UAW) has a significantly different labor agreement," he said.

"That should enable this car to be profitable," Wagoner said.